The UAE on Wednesday announced the first phase of a tax incentives programme for research and development (R&D) to strengthen the country’s innovation ecosystem.
Under the first phase, businesses will be able to benefit from a non-refundable R&D tax credit of up to 50 per cent on qualifying expenditure of up to Dh5 million to encourage private-sector investment in research and innovation.
The UAE aims to become a global hub for advanced industries and emerging technologies.
The initial design of the incentive takes into account recent developments under the OECD Pillar Two framework, recognising that in the current international tax environment, a non-refundable credit is expected to deliver a more favourable and predictable effective tax rate outcome for companies operating in the UAE.
The introduction of an easy-to-administer, non-refundable credit also reflects the early stage of the UAE’s Corporate Tax regime, which was recently implemented.
Phase 1 has therefore been structured to provide immediate and meaningful support to businesses undertaking genuine R&D activities, while enabling the Ministry of Finance to monitor uptake, assess behavioural and economic impacts, and gather the data necessary to inform future policy development.
Insights from Phase 1 will guide the design of Phase 2 of the R&D Tax Incentives Programme. During the next phase, the Ministry of Finance will evaluate potential enhancements, including consideration of a refundable credit and/or expanding the level of qualifying expenditure eligible for relief, either across the economy or within priority sectors.
Further details on Phase 2 will be announced in due course.
What firms will benefit
Anurag Chaturvedi, CEO of Andersen UAE, said the UAE’s R&D Tax Incentives Programme is a timely measure that reflects the country’s continued momentum as a destination of choice for innovation-driven businesses and long-term capital.
“As the UAE strengthens its position as a global hub, this incentive adds meaningful institutional substance to an already compelling proposition. Businesses and investors looking to anchor their regional presence in a jurisdiction that combines fiscal clarity, regulatory confidence, and now direct innovation support will find this programme a further reason to deepen their commitment here,” he said.
Anurag Chaturvedi
Chaturvedi added that businesses best positioned to benefit are technology companies, fintech and regtech players, energy transition ventures, and advanced manufacturers.
“For multinationals and regional holding structures, this credit can meaningfully reduce the effective tax burden on innovation spend – provided the interaction with OECD Pillar Two GloBE calculations is properly modelled. For smaller, domestically focused businesses, it signals that the UAE fiscal framework is being built to support them as they grow and scale.”
He added that the UAE authorities’ pragmatic and resident-first governance approach has defined the country’s institutional character.
“Signalling flexibility on tax residency day-count requirements – on a case-by-case basis – demonstrates that the UAE understands the real-world circumstances of its resident community and is willing to respond with measured, considered policy. For high-net-worth individuals and business owners who have built their lives, their companies, and their wealth structures around UAE tax residency, this is a reassuring and important development,” he said.
He added that the ‘centre of life’ framework already provides meaningful flexibility, and the FTA’s willingness to apply force majeure considerations alongside that adds a further layer of protection for residents whose ties to the UAE are genuine and enduring.
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Waheed Abbas
Waheed Abbas is Assistant Editor, covering real estate, aviation and other business stories that dir...