UAE R&D Tax Credit: Cabinet Decision 215 Explained for Founders

On 31 December 2025, the UAE Cabinet issued Cabinet Decision No. 215 of 2025 - the country's first ever R&D Tax Credit. Effective for tax periods starting on or after 1 January 2026, it allows qualifying companies to offset a percentage of their R&D spending against their Corporate Tax or Top-up Tax liability.

This is a big deal. The UAE has never had an R&D incentive like this. But the Decision itself is 6 pages of legal text spread across 14 articles, and the implementing rules from the Emirates R&D Council haven't been published yet.

This guide breaks it all down for founders and CFOs - what it means, whether you qualify, and what to do about it right now.

What Is the UAE R&D Tax Credit?

The R&D Tax Credit is a tax incentive that reduces your Corporate Tax or Top-up Tax bill based on how much you spend on qualifying research and development activities in the UAE.

Here is how it works at a high level:

• You spend money on qualifying R&D activities in the UAE
• You apply for pre-approval from the Emirates Research and Development Council
• At tax filing time, you claim a credit equal to a percentage of that qualifying spend
• The credit reduces your Corporate Tax and/or Top-up Tax liability

The exact credit rate hasn't been announced yet - the Minister of Finance will set it through a separate decision. The rate may vary based on how much you spend, the number of employees involved, and other criteria.

Unused credits can be carried forward indefinitely. They can also be transferred under certain conditions (details to be published by the Minister).

Who Qualifies?

To claim the R&D Tax Credit, your company must meet all of the following conditions (Article 3):

• UAE entity: You must be a juridical person incorporated in the UAE, including Free Zone entities. Foreign companies with a UAE Permanent Establishment also qualify.
• Subject to tax: You must be liable for Corporate Tax (9%) and/or the Pillar Two Top-up Tax.
• Minimum employees: You need a minimum number of employees engaged in R&D activities. The exact threshold will be set by the Minister.
• Pre-approval: You must obtain pre-approval from the Emirates R&D Council before claiming.
• Financial burden: Your entity must bear the cost of the R&D activities - not a parent company or related party.
• Entitled to returns: You must be beneficially entitled to a share of the returns from exploiting the R&D results (including intangibles, IP, or commercial use).
• Genuine R&D objective: Your R&D project must have a specified objective to increase knowledge or devise new applications of existing knowledge.

If you're a Free Zone company, there's an extra condition. You must either be paying Corporate Tax at 9% on your R&D-related income, or be subject to the Top-up Tax.

Who Is Excluded?

Three types of entities cannot claim (Article 4):

1. Entities not subject to Corporate Tax or Top-up Tax
2. Companies that elected for Small Business Relief under Article 21 of the Corporate Tax Law (the AED 375,000 threshold)
3. Any other entity the Minister specifies

If you're on Small Business Relief, you'll need to opt out of it before you can claim the R&D credit. Whether that trade-off makes sense depends on your numbers.

What Counts as R&D?

The Decision defines Research and Development as:

"Creative and systematic work undertaken in order to increase the stock of knowledge, including knowledge of humankind, culture, and society, and to devise new applications of available knowledge."

This is broadly aligned with the OECD Frascati Manual definition. It covers:

• Basic research: Work to acquire new knowledge without a specific commercial application in mind
• Applied research: Work directed toward a specific practical objective
• Experimental development: Systematic work using existing knowledge to create new products, processes, or services

What it does not cover is routine product development, market research, quality control, or cosmetic improvements to existing products. The R&D must genuinely aim to resolve scientific or technological uncertainty.

Importantly, the R&D activities must be conducted in the UAE. Offshore R&D does not qualify, even if the company is UAE-based.

Qualifying Expenditure and the AED 500K Threshold

Not all R&D spending qualifies. Article 5 sets out specific categories and conditions.

What You Can Claim

• Staff costs - Salaries, benefits, and related costs for employees directly engaged in R&D
• Consumable costs - Materials, cloud computing, lab supplies used in R&D activities
• Subcontracting fees - Payments to third parties for R&D work (must be conducted in the UAE)
• Cost contribution arrangements - Your arm's length share in joint R&D arrangements
• Capitalised intangibles - R&D costs capitalised under accounting standards for internally generated intangibles

The AED 500,000 Minimum

Your qualifying R&D expenditure must be at least AED 500,000 per project per tax year (excluding any staff cost uplift determined by the Minister). Projects that fall below this threshold do not qualify.

This means smaller R&D initiatives might need to be structured as part of a larger project to cross the threshold. More on that in our guide to structuring R&D projects around the AED 500K threshold.

What Disqualifies Expenditure

• Spending that is not wholly and exclusively for R&D (though apportionment is allowed for mixed-use costs)
• Costs funded by a government grant
• Costs already covered by another tax incentive, credit, or exemption
• Costs that are not deductible expenditure under the Corporate Tax Law (except capitalised intangible costs)

How to Claim the Credit

Claiming the R&D Tax Credit is a four-step process:

Step 1: Get Pre-Approval

Before you can claim, you need pre-approval from the Emirates Research and Development Council. The Council will issue detailed rules on the application process, timelines, and review procedures (Article 12). These haven't been published yet.

Step 2: Track Your Expenditure

You need to categorize and track your R&D spending by project, broken down into the Article 5 categories. This is where most companies will need to update their accounting processes.

CrossVal's R&D expenditure tracking can automatically flag qualifying costs as you categorize transactions, giving you a running total per project against the AED 500K floor.

Step 3: Prepare Your Documentation

When you file your claim, you need (Article 9):

1. Proof of pre-approval from the R&D Council
2. A signed declaration by senior management confirming the accuracy of information
3. A breakdown of qualifying R&D expenditure as specified by the FTA
4. Audited financial statements
5. Any other documents specified by the Minister

Step 4: File with Your Tax Return

The R&D Tax Credit claim is submitted as part of your regular Corporate Tax Return or Top-up Tax Return. Late claims are not accepted unless the FTA grants an exception for extraordinary circumstances.

Claw-Back Risks

This is the part most guides skip - but it matters. Article 8 gives the authorities the power to claw back credits that were improperly claimed.

If the FTA determines that you did not continuously meet the conditions for a particular R&D project:

• Any credits already refunded or used to reduce your tax bill must be repaid to the FTA
• Any remaining unused credits for that project are immediately forfeited
• You cannot offset the claw-back amount against other tax losses, credits, or reliefs
• The clawed-back amount is treated as Due Tax for penalty calculation purposes

This means ongoing compliance isn't optional. You need to maintain proper documentation throughout the life of each R&D project, not just at filing time.

What Founders Should Do Now

The R&D Council's detailed procedures aren't published yet, but there's plenty you can do to prepare:

1. Check your eligibility. Use our free R&D Tax Credit Eligibility Checker to see if you meet the basic criteria.
2. Audit your current R&D spend. Look at your last 12 months of expenses. Which costs fall into the five qualifying categories? What is your total per project?
3. Structure your projects. Define clear R&D projects with specific objectives, expected outcomes, and distinct cost tracking. Each project needs to cross AED 500K.
4. Set up expenditure tracking. Start categorizing R&D costs now so you have clean data when it's time to file. Tag staff costs, consumables, and subcontracting fees separately.
5. Review your Free Zone status. If you're in a Free Zone with 0% tax, you won't qualify unless you're paying 9% on R&D income or are subject to Top-up Tax.
6. Talk to your tax advisor. This Decision interacts with your broader Corporate Tax position. Get professional advice on whether to claim the credit or stick with Small Business Relief.

Frequently Asked Questions

What is the R&D Tax Credit rate?

The exact rate has not been announced. The Minister of Finance will issue a decision specifying the applicable rates, which may vary based on expenditure amount, number of R&D employees, and other criteria. The credit is calculated as a percentage of qualifying R&D expenditure.

Can Free Zone companies claim the R&D Tax Credit?

Yes, but only if they are paying Corporate Tax at 9% on income derived from R&D activities, or if they are subject to the Top-up Tax. Free Zone entities on the 0% rate for qualifying income will need to assess whether their R&D income falls within the taxable portion.

What happens to unused R&D Tax Credits?

Unused credits can be carried forward to subsequent tax periods indefinitely. There is no expiry. Credits from earlier periods must be used first (FIFO). They may also be transferable under conditions to be set by the Minister.

Can I claim the R&D Tax Credit and other tax incentives together?

No. Article 5 explicitly states that qualifying R&D expenditure cannot be subject to any other incentive, credit, exemption, or relief under the Corporate Tax Law or any other legislation. This is a no-double-dipping rule.

When do I need to apply for pre-approval?

The Emirates R&D Council will publish the timelines and procedures for pre-approval applications. Since the Decision is effective for tax periods starting 1 January 2026, companies should prepare their documentation now so they can apply as soon as the Council opens the process.