UAE introduces R&D tax credit incentives from 1 January 2026

The UAE has introduced a new R&D tax credit regime, effective from 1 January 2026, marking an important step in strengthening the country’s position as a regional and global innovation hub.

The newly announced framework is designed to encourage investment in innovation, technology and knowledge-driven growth by offering eligible businesses tax credits on qualifying R&D expenditure undertaken in the UAE.

At Forvis Mazars, we help businesses understand how these developments may affect their tax position, compliance obligations and strategic investment plans.

What has been introduced?

Under the new regime, eligible businesses may benefit from tiered, non-refundable tax credits (expected to reach up to approximately 30%–50%, subject to final implementing regulations) on qualifying R&D expenditure undertaken in the UAE.

The credits may be used to offset UAE corporate tax liabilities. Their interaction with Pillar Two and UAE Domestic Minimum Top-up Tax (DMTT) rules will need to be carefully assessed, as non-refundable credits may impact effective tax rate calculations.

The regime applies to both UAE-based entities and foreign entities with a Permanent Establishment in the UAE carrying out qualifying R&D activities within the UAE, subject to specific conditions and approval requirements. An annual cap of AED 5 million applies to the available tax credits.

Key considerations for businesses

While the new regime presents a significant opportunity for innovation-focused organisations, businesses should carefully assess the eligibility criteria and compliance requirements.

Key areas to consider include:

• Whether activities meet the definition of qualifying R&D
• Whether the work is undertaken and substantiated in the UAE
• Pre-approval and registration requirements
• Documentation and evidence standards
• Alignment with transfer pricing and substance requirements
• Impact on Pillar Two effective tax rate calculations and DMTT exposure

Given that this has been introduced as Phase 1, further developments and clarifications may follow.

How Forvis Mazars can help

Our tax specialists can support your business with:

• Eligibility assessments for R&D tax credits
• Review of qualifying expenditure
• Documentation and evidence frameworks
• Pre-approval and compliance support
• Pillar Two and top-up tax impact assessments
• Strategic tax planning for innovation-led businesses 

If your organisation is investing in research, product development, technology or process innovation in the UAE, now is the time to assess the potential benefits under the new regime.

Get in touch with Forvis Mazars to discuss how these changes may apply to your business.