MD 24/2026 — R&D tax credit rates, qualifying activities and expenditure rules

Factual summary

Sets the detailed rules for the R&D Tax Credit under Cabinet Decision No. 215 of 2025. The non-refundable credit is 15% on the first AED 1 million of Qualifying R&D Expenditure, 35% on the portion up to 2 million and 50% on the portion up to 5 million, each band needing a minimum average of 2, 6 or 14 R&D Staff. It defines Qualifying R&D Activities by the Frascati Manual criteria, staff costs (with a 30% uplift), consumables, subcontracting and cost contribution arrangements, and sets the ownership tests for carry-forward (50%) and transfer (75%), restructuring, Tax Group and Domestic Group use, 7-year records and anti-abuse claw-backs within 5 years.

What it means in practice Professional insight

Who: companies and groups claiming the UAE R&D Tax Credit. What to check: the expenditure bands against average R&D Staff, Council pre-approval per project, intra-group recharges and subcontracting, ownership changes before carry-forward or transfer, and the 5-year exit and 7-year record rules.

Key provisions

• Art. 2(1), (7) R&D Tax Credit rates per Qualifying Entity or Tax Group in each Tax Period or Fiscal Year: 15% on the first AED 1 million of Qualifying R&D Expenditure with an average of at least 2 R&D Staff; 35% on the portion exceeding 1 million and up to 2 million with at least 6; 50% on the portion exceeding 2 million and up to 5 million with at least 14; each rate applies to the portion within its threshold, and if either the expenditure or the staff threshold is not met the rate is adjusted down to the highest rate for which both are satisfied.
• Art. 2(2)–(4) The credit is non-refundable and is used against the Corporate Tax and/or Top-up Tax of the Qualifying Entity, Tax Group, Domestic Group or a transferee; within a Tax Group the expenditure and R&D Staff of all Qualifying Entities are aggregated; the average R&D Staff is the monthly total divided by the number of months in which Qualifying R&D Activities were undertaken.
• Arts. 3–4 A Qualifying R&D Activity must be novel, creative, uncertain, systematic and transferable or reproducible, assessed against the OECD Frascati Manual; only activities carried out in the State qualify, and research in the social sciences, humanities and the arts is excluded; the Council's pre-approval is required for each R&D Project, and it may ask for progress updates with technical documentation.
• Arts. 5–7 Unused credit is carried forward only while the same Persons continuously own at least 50% of the Qualifying Entity or, after a change of more than 50%, the same or a similar Business continues (Art. 39(2) factors), not applicable to listed entities; credit may be transferred to a juridical person with at least 75% common ownership, used in the same period and not carried forward or transferred again; on a business restructuring meeting Art. 27(2) of the Corporate Tax Law (except paragraphs (c) and (d)) the transferee takes over the credit if it continues the Business and R&D for at least 2 years, otherwise claw-back applies.
• Arts. 8–11 Staff Costs (salaries, allowances, medical insurance, pension contributions, end-of-service gratuity, bonuses, benefits in kind and training, excluding employee stock option plans) of R&D Staff located in the State and under the entity's direct control are uplifted by 30% for overheads; consumable costs, subcontracting fees paid to a Person in the State for work done in the State, and arm's length contributions under a Cost Contribution Arrangement are defined; amounts recharged or acquired from, or subcontracted to, another member of the same Tax Group do not qualify.
• Arts. 12–14 Technical documentation is kept for 7 years after the end of the Tax Period or Fiscal Year; in a Tax Group the credit is used against the group's Corporate Tax first and the Parent Company claims it, with joint and several liability on claw-back; in a Domestic Group under Cabinet Decision No. 142 of 2024 it reduces the group's Top-up Tax (Arts. 5.2.3 and 5.2.4(a) of that decision) after Corporate Tax use.
• Arts. 15–18 Artificial separation of a Business to stay within the thresholds and arrangements to obtain or increase the credit are counteracted, with utilised credit clawed back and unused credit forfeited; the same applies if within 5 years from the end of the period of the last claim the entity ceases to be a Taxable Person, becomes a Qualifying Free Zone Person, applies small business relief, enters liquidation or redomiciles outside the State (except a business restructuring under Art. 7); applies to Tax Periods or Fiscal Years commencing on or after 1 January 2026 and effective from its date of issuance.