The UAE government has officially launched the first phase of its new R&D tax incentive program. Companies can now claim a tax credit of up to 50% of their R&D spending, capped at AED 5 million (≈ $1.36 million) per tax year.
This is not about direct cash payments, but about reducing the tax burden
The credit can be offset against corporate tax and, if necessary, against global minimum tax liabilities. The program is formalized through government resolutions, including Decree No. 215 of 2025, and is embedded into the country’s existing tax system.
The incentive rate is progressive — from 15% to 50% — and depends on the volume of investment and the size of the R&D team. The higher the expenses and headcount, the greater the compensation.
The minimum threshold for participation is 500,000 dirhams per project, and expenses must be substantiated and comply with international standards (including OECD criteria).
The program is not for everyone
Excluded from the program are small companies that already benefit from tax reliefs, as well as projects where “innovation” is limited to marketing or basic software configuration. The focus is on technology companies, manufacturing, biotech, and energy.
The first phase is deliberately conservative: the credit is non-refundable, so as not to complicate calculations under the global tax reform (Pillar Two). However, authorities have already signaled that the parameters may be expanded in the second phase.
Context
Corporate tax in UAE was introduced relatively recently: 0% on profits up to 375,000 dirhams and 9% above that level. Now, tools are being added that not only collect taxes but also stimulate investment.
In essence, this is a strategic move for UAE: the Emirates are trying to establish themselves as a regional hub for technology and R&D, competing not only with tax rates but also with innovation infrastructure.
If the program operates transparently and without excessive bureaucracy, it could significantly reshape the economic landscape and attract companies that previously chose Europe or Asia for their R&D centers.