UAE launches Phase 1 of its R&D Tax Incentives Programme, offers up to 50% credit

The United Arab Emirates has officially launched Phase 1 of its Research and Development (R&D) Tax Incentives Programme.

“UAE launches R&D incentive scheme capped at Dh5m to drive research spending and innovation Dubai: The UAE has launched the first phase of its Research and Development (R&D) Tax Incentives Programme, offering businesses tax credits to encourage investment in innovation and technology”

Gulf News

This represents a significant policy initiative to strengthen the country's innovation ecosystem and support sustainable economic growth.

Gulf News

Under this initial phase, businesses can benefit from a non-refundable R&D tax credit of up to 50% on qualifying expenditure capped at AED 5 million (approximately Dh5 million).

The programme is designed specifically to encourage private-sector investment in research and innovation.

It supports the UAE's strategic ambition to become a global hub for advanced industries and emerging technologies.

The Ministry of Finance has structured this initial phase to provide immediate and meaningful support to businesses undertaking genuine R&D activities.

The tax incentive structure has been carefully designed to align with international tax frameworks.

Officials note the non-refundable credit approach is expected to deliver favourable and predictable effective tax rate outcomes.

The Times of India

This design choice reflects the early stage of the UAE's recently implemented Corporate Tax regime.

The structure is intended to be easy to administer for businesses and authorities.

Authorities have specifically acknowledged alignment with OECD Pillar Two framework developments.

This ensures the UAE remains competitive within the evolving international tax landscape.

The R&D tax incentive programme covers a range of qualifying activities and expenses.

“Strengthening the country’s innovation ecosystem and supporting sustainable, long-term economic growth United Arab Emirates:The UAE today announced the launch of Phase 1 of its Research and Development (R&D) Tax Incentives Programme, marking an important step in strengthening the country’s innovation ecosystem and supporting sustainable, long-term economic growth”

ZAWYA

Eligible R&D activities must be conducted within the UAE.

Covered expenses include staff costs, materials, and innovation-related development work.

Businesses can claim between 30% and 50% of qualifying expenditure.

The higher rate of 50% is available for more substantial investments.

Unlike direct subsidies, this credit reduces corporate tax liability rather than providing cash payouts.

The R&D tax incentive supports broader economic transformation goals.

It strengthens the nation's knowledge-based economy objectives.

The Times of India

The programme encourages private sector investment in innovation.

It specifically supports high-value sectors like AI, clean energy, and advanced manufacturing.

The policy follows introduction of a 9% corporate tax on profits above AED 375,000.

This represents a significant shift in the UAE's economic model.

The system balances taxation with competitiveness for innovation-driven companies.

Phase 1 serves as a testing ground for the R&D incentive programme.

“The UAE Ministry of Finance launched a major tax incentive allowing businesses to claim up to 50% tax credit on research and development (R&D) spending, marking one of the most significant policy moves since the introduction of corporate tax in the UAE”

The Times of India

The Ministry of Finance will monitor uptake and economic impacts.

Gulf News

Data collection will inform future policy development.

Phase 2 may include refundable credit structures.

Future phases could expand qualifying expenditure eligibility.

This phased approach enables evidence-based policy decisions.

Further details on Phase 2 will be announced according to authorities.