The UAE has now issued Ministerial Decision No. (24) of 2026 (the “Ministerial Decision”), setting out the detailed implementing rules for the R&D Tax Credit framework introduced under Cabinet Decision No. (215) of 2025 for the purposes of the UAE Corporate Tax regime.

This is a significant milestone. The Ministerial Decision confirms the commercial features of the incentive that were previously not embedded in law, including the applicable credit rates, the non-refundable design in Phase 1, the minimum staffing requirements, the treatment of contractors and externally provided workers, the qualifying cost categories (including a notable uplift on staff costs), and the mechanics for applying the credit against UAE Top-up Tax under the domestic Pillar Two regime.

Importantly, the rules now allow businesses to move from high-level consideration to practical planning.

Key Highlights

• The UAE R&D Tax Credit will apply at tiered rates of up to 50%, calculated on qualifying R&D expenditure of up to AED 5 million per tax period or fiscal year.
• The credit is confirmed to be non-refundable in Phase 1, but may be used to settle UAE Corporate Tax and UAE Top-up Tax, subject to specified utilization rules. This includes the ability to carry the credit forwards and to transfer it to certain group entities that meet the requirements.
• Access to the incentive is conditional on prior approval by the UAE R&D Council at a project level, supported by ongoing compliance and documentation.
• Minimum R&D staff thresholds are central to accessing higher rates and can include qualifying externally provided workers, subject to control and location conditions.
• Qualifying Staff Costs are uplifted by 30% to reflect overheads reasonably attributable to the undertaking of qualifying UAE R&D activities. This uplift applies to eligible employee costs and can also apply to eligible externally provided workers (EPWs) where the EPWs meet the “R&D Staff” conditions and the costs are treated as Staff Costs for the purposes of calculating Qualifying R&D Expenditure, but not for the calculation of general Taxable Income.
• Detailed eligibility rules also apply to consumables, subcontracting and cost contribution arrangements, including restrictions for certain intra-tax group charges and specific conditions for related party subcontracting.
• As drafted, the regime requires prior project-level approval, and there is no explicit provision for retrospective approval. Until further guidance is issued, businesses should not assume that expenditure incurred before approval will qualify.
• The design of the credit makes clear that Pillar Two interaction has been considered, although the non-refundable structure will be critical in determining effective tax rate outcomes. More to follow soon on the assessment of the regime against the Qualifying Tax Incentives requirements under Pillar Two, should the UAE enact the SBS Package.
• The rules apply to tax periods or fiscal years beginning on or after 1 January 2026.

What We Now Know (From the Ministerial Decision)

Credit Rates and R&D Staff Requirements

The Ministerial Decision confirms that the R&D Tax Credit is calculated using a progressive rate structure, with the applicable rate dependent on both qualifying expenditure and average R&D staffing levels during the period. Access to the regime is also subject to a minimum qualifying spend requirement at the project level (AED 500,000 per R&D Project per Tax Period/Fiscal Year).

The credit is calculated across each band. A qualifying entity or tax group must meet both the expenditure threshold and the corresponding staffing threshold to access a particular rate. If either requirement is not met, the applicable rate is reduced to the highest level for which both conditions are satisfied. Where a tax group is in place, qualifying expenditure and R&D staff are assessed on a group-wide aggregated basis.

Refundability and Use of the Credit

The Ministerial Decision confirms that the R&D Tax Credit is non-refundable.

The credit may be used to reduce UAE Corporate Tax liabilities, and where relevant, UAE Top-up Tax liabilities under the domestic Pillar Two framework. Where the credit cannot be fully utilized in the year it arises, it may be carried forward or transferred within qualifying group structures, subject to ownership continuity, activity continuation and anti-abuse rules.

For many businesses, particularly those in investment or scale-up phases, this non-refundable design will be a key factor in assessing the timing and cash-tax value of the incentive.

Qualifying Cost Categories (High Level)

The Ministerial Decision provides detail on the eligible cost categories and confirms that only UAE-performed qualifying activity is within scope. In headline terms, the categories include:

• Staff Costs

Employee Costs
Employment-related costs for employees who qualify as R&D Staff and are directly and actively engaged in qualifying UAE R&D activities. Only the portion reasonably attributable to qualifying R&D time is eligible. Qualifying Staff Costs are uplifted by 30% in determining Qualifying R&D Expenditure to reflect attributable overheads.

Externally Provided Worker (EPW) Costs *

Costs of eligible externally provided workers (i.e. individuals engaged through a third party) may qualify where they meet the R&D Staff conditions, including being located in the UAE when performing qualifying R&D activities and working under the claimant’s supervision, direction and direct control. Where EPW costs are treated as Staff Costs, the 30% uplift applies in the same way as Employee Costs.

• Consumable Costs
  Costs of consumable or transformable materials directly used in qualifying UAE R&D activities (and no longer usable in their original form), together with certain non-capital licence-type costs and clinical trial participant payments where relevant.
• Subcontracting Fees
  Payments to UAE-based subcontractors for qualifying R&D activities performed in the UAE, subject to specific conditions, including restrictions on onward subcontracting and additional requirements in related party cases.
• Cost Contribution Arrangements (CCAs)
  A qualifying entity’s share of contributions under a CCA may qualify where determined on an arm’s length basis, reflects the entity’s expected share of benefits and relates to qualifying R&D activities carried out in the UAE.

Mandatory Pre-Approval and Ongoing Compliance

Access to the R&D Tax Credit regime is subject to mandatory pre-approval by the UAE R&D Council on a project-by-project basis. Claims made without prior approval will not be eligible, highlighting that businesses should ensure that they consider their significant projects early.

The Ministerial Decision also anticipates ongoing oversight, including the ability for the Council to request progress updates and supporting technical documentation during the life of an R&D project. This reinforces the need for early project identification, ongoing documentation to be periodically updated and structured internal processes rather than treating this as a year-end exercise.

Pillar Two / Top-up Tax Considerations

The interaction with Pillar Two is one of the most commercially important aspects for large multinational groups.

The Ministerial Decision expressly allows the R&D Tax Credit to be applied against Top-up Tax liabilities, and it includes detailed mechanics for Domestic Groups, including filing responsibilities, utilization ordering and claw-back exposure where eligibility conditions are not met.

The Ministry of Finance has indicated that the design is intended to support a predictable Pillar Two outcome, but outcomes will vary significantly depending on the broader profile of the group. Early modelling remains important, especially where UAE entities are close to the minimum effective tax rate.

Key Takeaways

• The R&D Tax Credit regime is now operationally defined, allowing businesses to move from high-level assessment to practical planning.
• Mandatory pre-approval fundamentally changes the timeline, early identification of significant qualifying projects is essential.
• Resourcing decisions matter, not just spend. R&D staff levels, location and control directly affect both eligibility and the rate achieved.
• The 30% uplift on Staff Costs (including eligible externally provided workers treated as R&D Staff) is a significant value driver. However, it also increases the importance of careful contract and delivery-model review. In practice (and as seen in other global regimes), the distinction between subcontractors and EPWs will be a key point influencing both cost eligibility and access to higher credit rates.
• Liabilities to absorb, although carry‑forward and group transfer options offer flexibility where conditions are met.
• Pillar Two interaction is explicitly addressed; however, the practical impact will depend on how and when the credit is utilized at a group level, meaning targeted modelling is advisable rather than assuming a uniform outcome.

• Transfer pricing considerations may arise where R&D incentives apply, with the FTA’s APA guidance identifying tax incentives as a scenario where an APA may be appropriate (see A&M’s APA alert)

  With the regime in effect from 1 January 2026, businesses should begin preparation now (including considering which projects to pre-approve) to avoid missing the first year of potential benefit.