Key takeaways
- The R&D tax credit is enacted by Cabinet Decision No. 215 of 2025 and Ministerial Decision No. 24 of 2026, for tax periods starting on or after 1 January 2026.
- Qualifying spend earns 15%, 35% and 50% in bands up to AED 5 million, so the credit is capped at AED 2 million a year, and each band needs a minimum number of R&D staff.
- The credit is non-refundable: it reduces corporate tax and then Top-up Tax, and any unused amount carries forward.
- Each project needs at least AED 500,000 of spend and pre-approval from the Emirates Research and Development Council.
The UAE R&D tax credit applies to tax periods starting on or after 1 January 2026, and it can reduce a company's tax by up to AED 2 million a year. It is not, however, the refundable "30 to 50%" credit that many published summaries still describe. It only offsets tax that would otherwise be payable, and each project needs approval before a claim can be made. For a business with a meaningful research programme, the value of the credit depends as much on the tax it can absorb as on the spend it rewards.
The legal basis of the R&D tax credit
The credit is enacted by Cabinet Decision No. 215 of 2025 and Ministerial Decision No. 24 of 2026. The Ministry of Finance launched Phase 1 on 18 March 2026. It applies to tax periods starting on or after 1 January 2026, so the first claims go in FY2026 returns. For a calendar-year company, that is the return due by 30 September 2027.
How the credit is calculated
Qualifying R&D spend earns credit in three bands. Each band has its own rate and its own minimum number of R&D staff, measured as an average.
| Qualifying spend | Credit rate | Minimum average R&D staff | Maximum credit from the band |
|---|---|---|---|
| First AED 1m | 15% | 2 | AED 150,000 |
| AED 1m to AED 2m | 35% | 6 | AED 350,000 |
| AED 2m to AED 5m | 50% | 14 | AED 1,500,000 |
| Total | AED 2,000,000 |
Qualifying spend is capped at AED 5 million per tax period. That is why the credit tops out at AED 2 million: AED 150,000 + AED 350,000 + AED 1,500,000.
Worked example: AED 2.5 million of spend, 15 staff
A company spends AED 2.5 million on approved R&D projects in FY2026 and has an average of 15 R&D staff. Fifteen is above the 14 needed for the top band, so all three bands are open:
- 15% × AED 1,000,000 = AED 150,000
- 35% × AED 1,000,000 = AED 350,000
- 50% × AED 500,000 = AED 250,000
The credit is AED 750,000, or 30% of the spend overall.
Its taxable income for the year is AED 5,375,000, so its corporate tax is 9% of the AED 5,000,000 above the band, AED 450,000. The credit eliminates that liability and leaves AED 300,000 unused. Because the credit is non-refundable, the AED 300,000 is not paid out in cash. The company is not part of a large multinational group, so there is no Top-up Tax to set it against, and it carries forward to a later year.
A smaller programme: AED 1.6 million, 8 staff
With 8 R&D staff, a company clears the 6 needed for the 35% band but not the 14 needed for the 50% band. On AED 1.6 million of spend, the credit is 15% × AED 1,000,000 + 35% × AED 600,000 = AED 150,000 + AED 210,000 = AED 360,000, or 22.5% of spend.
With 2 to 5 R&D staff, only the 15% band is open. Headcount, in other words, sets the ceiling as firmly as spend does.
A non-refundable credit is worth only the tax it can absorb. The corporate tax calculator estimates the liability a credit would be set against.
What qualifies
The work must be R&D as defined in the OECD's Frascati Manual, the international reference for what counts as research and experimental development, and it must be carried out in the UAE. Each project needs at least AED 500,000 of spend and must be pre-approved by the Emirates Research and Development Council. The claim is made in the corporate tax return, or in the Top-up Tax return.
Who is excluded
Businesses that elect Small Business Relief cannot claim. A smaller company with a substantial R&D programme therefore faces a genuine choice, and both routes are worth modelling before the return is filed.
Free zone persons are excluded unless the R&D income is taxed at 9% or is subject to Top-up Tax. Groups with free zone entities should check this before building a claim; our free zone corporate tax team can advise.
The "30 to 50% refundable" error
The 2024/25 consultation proposed a refundable credit of 30 to 50%. The law as enacted is different: 15%, 35% and 50% in bands, and non-refundable. Some summaries online still repeat the consultation design, so the source should be checked before any cash refund is budgeted.
The Ministry of Finance has said a second phase will consider refundability, a higher cap, or both. The legal basis already exists: Federal Decree-Law No. 28 of 2025 added Article 49 bis to the corporate tax law, which allows unused incentive credits to be claimed under a future Cabinet decision. We are not aware of a decision that uses it yet. The separate, refundable credit for high-value employment should be treated the same way: it has not been enacted.
The same decree-law sets the order in which credits are used. A company applies its withholding tax credit first, then its foreign tax credit, then Cabinet-specified credits and incentives such as the R&D credit, and pays any balance in cash.
Details still being finalised
Some operational details were still being finalised at the time of writing, and published summaries differ in places.
Reports in mid-2026 said the Council's pre-approval portal and its timelines were not yet in place, so the current position should be confirmed before a claim is planned around them. Unused credit is reported to carry forward with no time limit, subject to continuity conditions. Credits are also reported to be transferable within groups under conditions, and liable to be clawed back if the entity stops being taxable within five years.
What to do now
- List the 2026 projects and test each one against the Frascati definition and the AED 500,000 minimum.
- Track average R&D headcount, since the bands depend on it.
- Code R&D costs separately in the ledger, project by project, from the start of FY2026.
- Prepare the pre-approval case for each project while the Council's process is confirmed.
- Check eligibility first for any free zone entity, or any company that might elect Small Business Relief.
- Model the credit against expected tax, this year and in the years it would carry forward.
Our advisory and planning team handles the modelling. For groups in scope of the global minimum tax, the interaction with Top-up Tax needs modelling too.
How ebs can help
ebs Chartered Accountants is an FTA Registered Tax Agency (TAN 30022834), and our chartered accountants have Big Four audit-firm experience. We test your projects against the conditions, set up R&D cost tracking in your books, model the credit against your expected tax, and prepare the claim in your return. Pre-approval decisions rest with the Emirates Research and Development Council. The first consultation is free: contact us.
This article is general information as at 4 August 2026, not advice on your specific circumstances. Tax rules change; check the current position before acting.