Launch of the First Phase of the Tax Incentives Programme for Research and Development
The United Arab Emirates has announced the launch of the first phase of the "Tax Incentives Programme for Research and Development".
The Ministry of Finance stated in a press release today that companies and businesses can, in the first phase, benefit from a non-refundable tax credit for Research and Development (R&D) activities, at a rate of up to 50% of qualified R&D expenditures, up to a maximum limit of five million dirhams.
This incentive aims to encourage the private sector to invest in the fields of research, development, and innovation, aligning with the nation's aspirations to become a global hub for advanced industries and future technology.
This incentive also takes into account recent developments in the global tax landscape under the "Pillar Two" framework issued by the Organisation for Economic Co-operation and Development (OECD). It is expected that the non-refundable tax credit will contribute to providing more stable and transparent effective tax rates for companies operating in the country within the current global tax environment.
The adoption of the non-refundable credit model – characterised by its flexibility in administration and ease of application – reflects the modernity of the corporate tax system in the country.
On this basis, the first phase of this incentive has been structured to provide immediate and tangible support to companies engaged in genuine research and development activities, while simultaneously enabling the Ministry of Finance to monitor the uptake of this incentive, assess its behavioural and economic impacts, and collect the necessary data for developing future policies related to it.
The results and outcomes of this phase are expected to form a roadmap for designing the second phase of the programme. The Ministry of Finance will work on evaluating the expansion of the scope of incentives, including studying the possibility of introducing a refundable tax credit, or increasing the cap on eligible expenditures, whether comprehensively or at the level of priority strategic sectors. Details of the second phase will be announced in due course.
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