The UAE Ministry of Finance has issued Ministerial Decision No. 24 of 2026, setting out the detailed rules for the operation of the R&D Tax Credit introduced under Cabinet Decision No. 215 of 2025 for UAE Corporate Tax purposes.

This is the legislation that makes the regime operational. Until now, businesses had visibility on the policy direction, but not on the mechanics. The Ministerial Decision now addresses the applicable credit rates, staffing thresholds, qualifying expenditure, pre-approval requirements, carry-forward and transfer rules, restructuring scenarios, and anti-abuse provisions.

The rules apply to tax periods or fiscal years beginning on or after 1 January 2026.

Key points

    • The UAE R&D Tax Credit is now supported by detailed implementing rules.
    • The credit is non-refundable, but it may be used against Corporate Tax and, where relevant, Top-up Tax.
    • The headline rate can reach 50%, although access depends on both qualifying expenditure and minimum R&D staffing thresholds.
    • Claims are subject to mandatory project-level pre-approval.
    • The regime places clear emphasis on UAE-based activity, substance and documentation.
    • For in-scope multinational groups, the interaction with the UAE Top-up Tax regime will need to be assessed carefully.
    • Access to the regime is also subject to broader conditions under the Cabinet Decision, including entity-level eligibility rules, a minimum project-level spend threshold, and restrictions on grant-funded expenditure and overlap with other incentives.

Who can benefit from the regime?

It is important to read the Ministerial Decision together with the underlying Cabinet Decision, because the broader framework contains several threshold conditions for access to the regime. In particular, the credit applies to UAE incorporated entities, including Free Zone Persons, and to certain foreign entities operating through a UAE permanent establishment, provided they are subject to UAE Corporate Tax and/or UAE Top-up Tax and carry on Qualifying R&D Activities.

By contrast, the regime does not apply to entities that are neither subject to Corporate Tax nor Top-up Tax, entities that have elected for Small Business Relief, or any other entities that may be specified by the Minister. For Qualifying Free Zone Persons, access is also restricted: a Free Zone Person must be subject either to 9% Corporate Tax on the relevant Taxable Income or to Top-up Tax in the relevant period. In other words, a Free Zone entity benefiting from the 0% regime applicable to a Qualifying Free Zone Person, and which is not subject to Top-up Tax, should generally not expect to qualify.

Why this matters

The Ministerial Decision provides the detail businesses need to assess whether the credit is likely to be available in practice.

The main point is not simply that the UAE has introduced a credit of up to 50%. The regime has been framed quite tightly. Access depends on approved projects, qualifying activity carried out in the UAE, specific categories of expenditure, sufficient staffing substance, and ongoing documentation. That is reflected throughout the regime, particularly in Articles 2, 3, 4, 8, 12, 15 and 16.

The regime is also not focused only on expenditure. At a broader level, eligibility depends on who bears the financial burden of the R&D and who is entitled to benefit from the resulting outcomes. That may be particularly relevant in group structures where R&D staff, funding, legal ownership and commercial exploitation sit in different entities.

Key features of the regime

1. Tiered credit rates and access conditions

Under Article 2, the credit applies on a progressive basis to qualifying R&D expenditure of up to AED 5 million per tax period or fiscal year.

    • The first AED 1 million may qualify for a 15% credit where the average number of R&D staff is at least 2.
    • The portion above AED 1 million and up to AED 2 million may qualify for a 35% credit where the average number of R&D staff is at least 6.
    • The portion above AED 2 million and up to AED 5 million may qualify for a 50% credit where the average number of R&D staff is at least 14.

The credit is calculated by applying the relevant rate to the expenditure falling within each band.

Article 2(7) makes clear that access to a particular band depends on meeting both conditions: the relevant expenditure threshold and the corresponding minimum average R&D staff threshold. If one of those tests is not met, the credit falls back to the highest band for which both conditions are satisfied. In the case of a Tax Group, Article 2(3) provides for aggregation of both qualifying expenditure and R&D staff.

Qualifying spend on its own is therefore not enough. Access to the higher credit bands also depends on there being sufficient R&D staffing substance in the UAE.

There is also a separate project-level threshold in the broader framework: qualifying expenditure must amount to at least AED 500,000 for each R&D Project in the relevant tax period or fiscal year, excluding any uplift to staff costs. This means that, even where a business is carrying on genuine R&D, smaller projects may fall outside the regime altogether.

2. The credit is non-refundable, but usable against Corporate Tax and Top-up Tax

The Ministerial Decision confirms in Article 2(2) that the credit is non-refundable. At the same time, that provision allows the credit to be used against Corporate Tax and/or Top-up Tax liabilities of the qualifying entity, tax group, domestic group, or another person under the transfer rules.

The Ministry of Finance has also stated publicly that the design of the regime takes recent OECD Pillar Two developments into account, and that the non-refundable structure is expected to support a more predictable and favourable effective tax rate outcome for businesses operating in the UAE.

For businesses in a loss position, or with limited UAE tax liability in the short term, the non-refundable nature of the credit will affect the immediate cash benefit. For larger multinational groups, the issue is wider. The regime appears to have been designed to operate within the UAE’s domestic Pillar Two framework.

What is helpful here is that the legislation does more than merely mention Top-up Tax. It includes specific ordering rules and Domestic Group mechanics for using the credit against Top-up Tax, which suggests that the interaction with the UAE’s domestic Pillar Two framework was considered from the outset. The practical impact on a group’s effective tax rate will still depend on how the credit is used, where it arises in the structure, and the group’s wider GloBE profile.

That said, the Pillar Two impact should not be assumed. It will depend on the facts and should be modelled accordingly.

3. Mandatory project-level pre-approval and claims

One of the more important operational points appears in Article 4. A qualifying entity must obtain pre-approval from the Council for any R&D project in respect of which the credit is claimed. The Council may also request progress updates and supporting technical documentation to confirm that the approved project continues to involve qualifying R&D activity and qualifying expenditure.

From a practical perspective, this is unlikely to be something businesses can deal with only at year-end as part of the tax compliance process. Projects will need to be identified early, assessed properly, and supported by documentation as they progress.

The legislation does not expressly deal with retrospective approval, so businesses should be careful before assuming that expenditure incurred before approval will still qualify.

The claims process is also worth noting. Under the broader framework, a claim must be submitted as part of the relevant Tax Return or Top-up Tax Return for the period in which the qualifying expenditure is incurred. The filing must be supported by proof of pre-approval, a senior management declaration, a breakdown of qualifying expenditure, audited financial statements, and any other required documents. Claims filed after the relevant return deadline are not to be considered unless the FTA accepts them in exceptional circumstances.

4. Only qualifying UAE-based R&D activity is in scope

The Decision adopts a relatively technical concept of R&D. Under Article 3(1), the activity must be novel, creative, uncertain, systematic, and transferable or reproducible. Article 3(2) expressly refers to the OECD Frascati Manual as the basis for determining whether an activity qualifies. Article 3(3) then provides that where an R&D project is carried out partly inside and partly outside the UAE, only the activities carried out within the State may constitute qualifying R&D activities. Article 3(4) excludes R&D in the fields of social sciences, humanities and the arts.

This narrows the scope materially. The question is not simply whether a business is investing in innovation in a broad commercial sense. The relevant question is whether it is carrying out qualifying scientific or technological R&D in the UAE, and whether that can be evidenced properly.

The broader framework also makes clear that an R&D Project must be organised and managed for a specific purpose, with its own objectives and expected outcomes. That point reinforces that the regime is built around identifiable projects, rather than broad descriptions of innovative activity across the business.

5. Detailed rules on qualifying expenditure

The Ministerial Decision provides a detailed framework for determining which categories of expenditure qualify.

Under Article 8, staff costs may qualify where they relate to R&D Staff located in the UAE and performing qualifying R&D activities under the supervision, direction and direct control of the qualifying entity. Article 8(3) then provides for a 30% uplift on staff costs to reflect overheads reasonably attributable to the R&D activity.

Article 8(4) sets out the included elements of staff cost, such as salaries, allowances, medical insurance, pension contributions, gratuity, bonuses, benefits in kind and other employment-related costs. Article 8(5) excludes employee stock option plans, while Article 8(6) includes certain training expenditure.

Under Article 9, consumable costs include consumable or transformable materials directly used in qualifying R&D and no longer usable in their original form, together with certain non-capital licence fees and payments to clinical trial participants.

Under Article 10, subcontracting fees may qualify where the R&D activity is contracted to a person based in the UAE, undertaken in the UAE, not re-subcontracted, not attributable to a foreign permanent establishment, and, in related-party cases, where the subcontractor maintains audited financial statements.

Under Article 11, amounts incurred under cost contribution arrangements may also qualify where the contribution is at arm’s length, reflects the entity’s expected share of benefits, and relates to qualifying R&D carried out in the UAE.

For many businesses, the 30% uplift on staff costs is likely to be one of the more valuable features of the regime.

There are, however, several broader conditions that are easy to miss if the expenditure rules are viewed in isolation. Qualifying expenditure must be incurred wholly and exclusively for qualifying R&D purposes, or apportioned on a reasonable basis where it serves more than one purpose. It must be deductible for UAE tax purposes, except in the case of the specific capitalised costs contemplated by the framework. It must not include any amount directly or indirectly funded by a grant provided by the Federal Government or a Local Government, to the extent that the expenditure is recorded in the financial statements of the claimant. And it must not already benefit from another UAE incentive, credit, exemption or relief.

Another point worth flagging is that the broader framework expressly contemplates that certain capitalised costs may still qualify. In particular, costs in the recognised expenditure categories that are capitalised under the applicable accounting standards in respect of internally generated intangibles resulting from qualifying R&D may still be taken into account. This is helpful, but it is also likely to require careful attention to accounting treatment and cost tracing.

6. The line between externally provided workers and subcontractors will matter

This is likely to become an important technical issue in practice.

The definition of R&D Staff in Article 1 includes not only employees, but also certain full-time or full-time equivalent externally provided workers, provided the conditions in Article 8 are met. Articles 8(8) and 8(9) then set out when an employee or externally provided worker falls within scope, including contractual and personal service conditions and, importantly, the requirement that the services do not amount to the subcontracting of R&D activities by the qualifying entity.

That distinction matters because it may directly affect both:

    • the amount of qualifying expenditure; and
    • whether the entity meets the staff thresholds required to access the higher credit bands under Article 2.

Given the 30% uplift on staff costs, this could have a direct impact on the value of the credit.

In practice, that means businesses may need to revisit how R&D resources are engaged, supervised and documented. For some groups, the distinction will not only affect the eligibility of costs, but may also determine whether the staffing thresholds for the higher credit bands can be met at all.

7. The regime gives some flexibility for group structures, but only within clear limits

The Decision does allow a degree of flexibility in group situations, although within defined boundaries.

Under Article 5, unutilised credits may be carried forward, subject to ownership continuity or business continuity conditions.

Under Article 6, a qualifying entity may transfer an unutilised credit to another juridical person subject to Corporate Tax and/or Top-up Tax where there is at least 75% common ownership. However, the transferee may use that transferred credit only against its own liability for the relevant period. It cannot carry the credit forward or transfer it again.

Under Article 7, credits may also move in certain restructuring scenarios where the whole business, or an independent part of it, is transferred and the relevant conditions are met, including continuation of the transferred business and associated qualifying R&D activities for at least two years. If those conditions cease to be met, claw-back may apply.

The regime is therefore flexible enough to be useful in a group context, but not in a way that allows credits to move freely without a genuine commercial basis.

There are two additional practical points worth highlighting here. First, the broader framework provides that carried-forward credits arising in earlier periods must be used before those arising in later periods. Second, continuity matters. In practice, M&A transactions, internal reorganisations, migrations into or out of Free Zone status, small business relief elections, or broader business model changes should all be reviewed carefully because they may affect whether credits can continue to be carried forward, transferred or preserved. The key question is not simply whether a credit can move. It is whether the continuity conditions needed to preserve it remain satisfied after the transaction or change.

8. Tax Groups and Domestic Groups

The interaction with group structures has been addressed in some detail.

Article 13 sets out specific rules for Tax Groups, including utilisation against group Corporate Tax liabilities, treatment of pre-grouping credits, claw-back, joint and several liability, and filing responsibilities.

Article 14 does the same for Domestic Groups in the Top-up Tax context, including utilisation ordering, claw-back and liability rules.

The interaction with the UAE’s Top-up Tax framework has not been left to implication or later guidance. It forms part of the legislative design itself. For multinational groups within scope, the credit therefore needs to be assessed not only as a UAE Corporate Tax incentive, but also in the context of group effective tax rate and Pillar Two modelling.

The same point also matters from an operating model perspective. The way a group allocates R&D functions, people, costs and ownership of outcomes across entities may directly affect where the credit arises, whether thresholds can be met, and how efficiently the benefit can ultimately be used.

9. The anti-abuse and claw-back provisions should be taken seriously

The anti-abuse provisions are substantive and should not be treated as standard boilerplate.

Article 15 addresses the artificial separation of business to obtain a credit advantage by reference to the thresholds in Article 2, linking this to Article 50(1) of the UAE Corporate Tax Law. Article 16 gives the Authority broader power to counteract arrangements, contracts or procedures adopted mainly or partly to obtain or increase an R&D credit in a manner inconsistent with the economic substance or genuine nature of the qualifying R&D activity.

The claw-back risk is also broader than traditional anti-avoidance. It may arise not only in cases of artificial separation or abusive arrangements, but also where a Qualifying Entity is later found not to have continuously met the conditions required for a particular R&D Project. In those cases, amounts already used may need to be repaid, unused amounts may be forfeited, and the broader penalty framework may also be engaged.

Article 16(2) also provides for claw-back in certain cases where, within five years from the end of the relevant period, the entity ceases to be taxable, becomes a qualifying free zone person, applies small business relief, enters liquidation or redomiciles outside the UAE, subject to the restructuring carve-out in Article 16(3).

Overall, the message is fairly clear: this is intended to be a controlled regime for genuine R&D activity carried out in the UAE.

What should businesses be doing now?

Businesses with potentially qualifying activity should now be moving into implementation. In practical terms, that is likely to involve:

    • identifying projects that may satisfy the technical R&D criteria in Article 3
    • considering whether pre-approval should be sought early under Article 4
    • reviewing how R&D teams are structured, including the use of externally provided workers
    • mapping which categories of expenditure are likely to qualify under Articles 8 to 11
    • assessing whether carry-forward, transfer or group utilisation rules may become relevant under Articles 5, 6, 13 and 14
    • ensuring that the business is building the necessary technical and financial evidence to support the claim over the seven-year record-keeping period required by Article 12
    • checking whether the relevant entity is actually within scope of the regime, particularly in Free Zone and mixed-group structures
    • reviewing whether any relevant expenditure may be affected by the AED 500,000 project threshold, government funding, or overlap with other UAE incentives
    • considering whether upcoming restructurings, ownership changes or business reorganisations could affect the preservation or use of credits
    • ensuring that claims can be filed on time through the relevant return process, rather than assuming the position can be regularised later

Our view

The UAE R&D Tax Credit regime is now operationally defined. For businesses with qualifying UAE-based R&D activity, the credit could be valuable. However, the regime is clearly designed to reward real substance, real control and real documentation, not simply headline expenditure.

The key takeaway is that this is not just a rate-driven incentive. It is a regime with real entry conditions, real operating requirements and real preservation risks. For many businesses, the challenge will not be whether they spend money on innovation. It will be whether the right entity is in scope, the right projects meet the threshold conditions, the right costs are being traced, and the wider group structure supports the claim.

With the rules applying from 1 January 2026, businesses should begin identifying potentially qualifying projects now and consider early pre-approval, delivery model review, and tax modelling before the first affected period progresses too far.

How we can help

If you would like to discuss how these rules may apply to your business, including project scoping, pre-approval readiness, qualifying cost analysis, delivery model review, or the interaction with Corporate Tax and UAE Top-up Tax, please reach out to your usual contact or any member of our tax team.