How research and development tax credit works

What Phase 1 is (and what it is not)

The R&D Tax Credit regime applies to Tax Periods or Fiscal Years commencing on or after 1 January 2026 (CD 215/2025, Article (13); MD 24/2026, Article (17)). Ministerial Decision No. 24 of 2026 states that the R&D Tax Credit shall be non-refundable (MD 24/2026, Article (2)(2)). In broad terms, the credit is calculated as a percentage of Qualifying R&D Expenditure incurred by the Qualifying Entity in the relevant Tax Period or Fiscal Year (CD 215/2025, Article (2)(1)), subject to conditions and procedures in the Cabinet and Ministerial Decisions.

Phase 1 is not a generic “innovation subsidy” for any project labelled R&D. The UAE framework ties technical tests to internationally recognised R&D concepts—notably the OECD Frascati Manual—and adds UAE-specific legal conditions on expenditure, governance, and administration. Treat marketing claims, vendor rebranding, or routine IT maintenance as high-risk unless you can map them carefully to the statutory definitions.

Primary sources: download the official PDFs— Cabinet Decision No. 215 of 2025 and Ministerial Decision No. 24 of 2026—and read them alongside the corporate tax law framework administered through the Federal Tax Authority.

Qualifying R&D activities: Frascati-based tests in plain language

Ministerial Decision No. 24 of 2026 sets the conditions for when an activity conducted in the State as part of an R&D Project is a Qualifying R&D Activity. The activity must meet all of the following conditions (MD 24/2026, Article (3)(1)):

• Novel: it aims to produce new findings.
• Creative: involving original concepts or hypotheses.
• Uncertain: the outcome or means of achieving it are not known in advance.
• Systematic: following a plan and budget.
• Transferable or reproducible: results can be applied or replicated in other contexts.

In assessing whether an activity meets these conditions, the Ministerial Decision requires having regard to the criteria set out in the Frascati Manual (MD 24/2026, Article (3)(2)). If an R&D Project is carried out partly inside and partly outside the State, only the R&D activities carried out within the State may constitute Qualifying R&D Activities (MD 24/2026, Article (3)(3)). Qualifying R&D Activities do not include activities in the fields of social sciences, humanities and the arts (MD 24/2026, Article (3)(4)).

If you are scoping projects, a structured R&D readiness assessment helps stress-test whether your technical narrative meets these dimensions before you invest in claim preparation.

Step-by-step claim process (end-to-end)

The exact sequence is governed by Cabinet Decision No. 215 of 2025 and Ministerial Decision No. 24 of 2026. The steps below are an operational checklist mapped to the published requirements (conditions to claim, mandatory pre-approval, record keeping, and submission rules).

1. Confirm you are a Qualifying Entity: Cabinet Decision No. 215 of 2025 defines “Qualifying Entity” (Article (1)). It also lists excluded entities, including entities that have elected for the application of Article (21) of the Corporate Tax Law (CD 215/2025, Article (4)(2)).
2. Define the R&D Project and activities in the State: A Qualifying R&D Activity must be conducted in the State as part of an R&D Project and satisfy the Ministerial conditions (CD 215/2025, Article (1); MD 24/2026, Article (3)).
3. Obtain mandatory pre-approval from the Council: The Qualifying Entity must obtain pre-approval from the Emirates Research and Development Council and comply with ongoing compliance requirements (CD 215/2025, Article (3)(1)(b); MD 24/2026, Article (4)).
4. Check project minimum and qualifying spend conditions: Qualifying R&D Expenditure must be wholly and exclusively for Qualifying R&D Activities and 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) (CD 215/2025, Article (5)(3)(a) and (b)).
5. Build evidence as you go (record keeping): Maintain technical documentation sufficient to demonstrate Qualifying R&D Activities and Qualifying R&D Expenditure for 7 years following the end of the Tax Period or Fiscal Year, and provide it to the Council and/or the Authority upon request (MD 24/2026, Article (12)(1)). The documentation must include written, visual, and electronic records detailing objectives, processes, methodologies, experiments, and findings (MD 24/2026, Article (12)(2)).
6. Quantify Qualifying R&D Expenditure by category: CD 215/2025 recognises Staff Costs, Consumable Costs, Subcontracting Fees, arm’s length cost contribution arrangements, and other categories specified by Ministerial decision (CD 215/2025, Article (5)(1)). Apply the detailed rules in MD 24/2026 (e.g., Staff Costs conditions and uplift in Article (8)).
7. Prepare the claim package: Cabinet Decision No. 215 of 2025 requires claims to be accompanied by proof of pre-approval, a signed senior management declaration, a breakdown of Qualifying R&D Expenditure per Authority requirements, audited financial statements, and any other information/documents specified by Ministerial decision (CD 215/2025, Article (9)(1)).
8. Submit with the Tax Return or Top-up Tax Return: The claim must be submitted as part of the Tax Return or Top-up Tax Return (as applicable) for the relevant Tax Period or Fiscal Year in which the Qualifying R&D Expenditure is incurred (CD 215/2025, Article (9)(2)). Claims submitted after the due date are not considered unless accepted by the Authority in exceptional circumstances (CD 215/2025, Article (9)(3)).
9. Apply utilisation, carry-forward and transfer rules: CD 215/2025 sets utilisation and carry-forward rules (Article (6)) and provides for transfer rules to be set by Ministerial decision (Article (7)). MD 24/2026 includes restrictions on carry-forward (Article (5)) and transfer conditions (Article (6)), and detailed rules for Tax Groups (Article (13)).

For operationalising steps 3–7, many teams pair documentation systems with claim readiness preparation so finance and technical teams produce one coherent story.

FTA filing integration (corporate tax context)

The R&D tax credit sits inside the UAE corporate tax regime administered by the Federal Tax Authority. That means your Phase 1 position is not a standalone “grant application” detached from tax filings: it must be consistent with your entity’s tax status, elections, grouping, free zone treatment (where relevant), and return timelines.

Practical integration points

• Return cycles: Align R&D credit calculations with the tax period used for corporate tax reporting.
• Data lineage: Ensure amounts claimed as qualifying R&D expenditure trace to audited management accounts, payroll, and supplier records submitted or available to the FTA.
• Guidance updates: Watch the FTA publications portal for corporate tax guides, clarifications, and any R&D-specific appendices issued after the Ministerial Decision.

Start from the FTA homepage at tax.gov.ae and subscribe to updates; MoF policy releases remain the anchor for statutory interpretation of Cabinet Decision No. 215 of 2025 and Ministerial Decision No. 24 of 2026.

Contemporaneous documentation: what it means in practice

The Ministerial Decision requires maintaining technical documentation sufficient to demonstrate Qualifying R&D Activities and Qualifying R&D Expenditure and to provide it to the Council and/or the Authority upon request (MD 24/2026, Article (12)). In practice, strong documentation is created as the R&D work occurs and forms a comprehensive collection of written, visual, and electronic records detailing objectives, processes, methodologies, experiments, and findings (MD 24/2026, Article (12)(2)). Strong documentation typically combines technical and financial threads:

• Technical thread: Project charter; hypothesis statements; design alternatives considered; test protocols; failed runs (they matter); benchmark comparisons; release notes; peer review notes.
• Financial thread: Project codes; timesheets or capacity models; contractor scopes; purchase orders tied to experiments; inventory movements for prototypes; allocation methodologies for shared services.
• Governance thread: Stage-gate approvals; risk registers; health/safety or regulatory testing where relevant to the technical story (common in aerospace, energy, pharma, and advanced manufacturing in the UAE).

If your teams struggle to produce this routinely, R&D team training plus a lightweight documentation playbook—often designed through our strategic planning engagements—closes the gap without slowing innovation.

Examples: qualifying vs non-qualifying (UAE context)

The following illustrations are educational only; classification always depends on facts and the statutory definitions in Cabinet Decision No. 215 of 2025 and Ministerial Decision No. 24 of 2026.

For deeper eligibility analysis—especially where free zone status, grouping, or small business relief may interact—read who qualifies for UAE R&D tax credits and confirm exclusions in the official text.

Where to read the official rules

• Cabinet Decision No. 215 of 2025 (MoF PDF)
• Ministerial Decision No. 24 of 2026 (MoF PDF)
• MoF announcement — Phase 1 programme launch
• Federal Tax Authority — corporate tax administration

For credit mechanics (rates, caps, staffing bands), see how much is UAE R&D tax relief. For ongoing support, explore ongoing advisory.