The United Arab Emirates has announced the launch of Phase 1 of its Research and Development (R&D) Tax Incentives Program, aimed at strengthening the nation’s innovation ecosystem and supporting sustainable, long-term economic growth.
Under the first phase, eligible businesses can benefit from a non-refundable R&D tax credit of up to 50 percent on qualifying expenditures of up to $1.36 million (AED5 million).
The measure aims to incentivize companies to increase investment in research-driven activities while enhancing competitiveness across key sectors.
The structure of the incentive has been carefully calibrated to ensure immediate impact, offering businesses a predictable and transparent mechanism to reduce their effective tax burden while undertaking innovation-led initiatives.
The program has been developed in consideration of international tax developments, particularly the Organisation for Economic Co-operation and Development’s (OECD) Pillar Two framework.
Within this evolving global tax landscape, the adoption of a non-refundable tax credit is expected to deliver more stable and favorable effective tax outcomes for companies operating in the UAE.
Additionally, the simplified design reflects the early stage of the UAE’s corporate tax regime, ensuring ease of administration while maintaining compliance with global standards.
Phase 1 has been structured to provide immediate and meaningful support to businesses engaged in genuine R&D activities while enabling the Ministry of Finance, UAE, to closely monitor program uptake and assess its economic and behavioral impact.
Data and insights gathered during this phase will play a critical role in shaping Phase 2 of the program.
Future enhancements under consideration include the introduction of a refundable tax credit and the potential expansion of qualifying expenditures, either across the broader economy or within priority sectors.
Through this phased rollout, the UAE is reinforcing its commitment to building a competitive, transparent, and internationally aligned tax framework.
The initiative is expected to accelerate innovation, attract high-value investments, and further solidify the country’s position as a leading destination for technology-driven growth.
