Discover how UAE’s refundable R&D tax credit promotes innovation, growth, and high-value employment. Learn eligibility, key benefits, and projections with BMS Auditing.
The United Arab Emirates is a highly favored destination for startups, branch setups, and franchises thanks to its geographical location, tax-friendly environment, and reputation as a regional economic powerhouse.
The UAE government has continuously introduced notable corporate tax initiatives that have been developed to encourage innovations in research and development and promote high-value employment. This measure is a part of the UAE’s strategic vision to support economic growth, foster innovation, and boost the adoption of advanced technology in all industry sectors.
Let’s have an in-depth analysis of current UAE corporate tax incentives and how R and D refundable tax credit measures promote economic growth and innovation.
Overview of UAE’s Refundable Tax Credit for High-Value Employment
The United Arab Emirates government offers a main incentive for businesses involved in R&D is the R and D Tax credit advantage. This credit enables qualified businesses to reduce a portion of their R&D expense from taxable income, thereby reducing corporate tax liability.
In Brief
Effective from January 1, 2025, high-value employment refundable tax credit will be calculated on the percentage of eligible salary cost for employees in leadership positions - who contribute to UAE’s economy. The positions include C-suite executives and senior management performs main business activities.
Key features
- The refundable tax credit benefits are designed for businesses in various industries such as technology, fintech, renewable energy, and sustainability.
- With the introduction of refundable tax credits, companies should take complete opportunities for growth, productivity, and technological development.
As the UAE is a global leader in innovation, this corporate tax advantage plays a significant role in economic diversification and fosters thriving in the competitive market.
The Objective of the R&D Tax Credit
The primary objective of this corporate tax initiative is to promote economic benefit, attract investment in R&D projects, and strengthen the UAE’s position in what is a globally competitive market.
UAE’s Research and Development Refundable Tax Credit: Innovating the Future
- R&D Tax Incentive:
The UAE Ministry of Finance takes a strategic move towards fostering innovation by launching an R&D subsidy, commencing from 1st Jan 2026. This expenditure-based initiative offers a refundable tax credit of 30% to 50%, varied by the size of the company and revenue. Adherence to OECD standards, this measure will propel innovation, strengthen technological transformation, and boost economic resilience.
- Employment Tax Credit
Refundable tax credit commencing from 2025, may fetch benefits for UAE businesses involved in high employment roles. These initiatives target senior personnel to enhance the country’s economic growth and competitiveness.
Eligibility Criteria
The UAE R&D tax credit program allows businesses to engage in R&D activities such as developing new programs, and new technologies aiming to reduce the financial burden on innovations and promote technological advancement.
R&D Tax Incentive: Key Qualification
To qualify for the R&D tax credit, companies must adhere to government-established criteria. The criteria involve:
- Nature of the qualifying R&D activities
- Documentation of R&D expenses
- Level of Innovation
Businesses must comply with these requirements while ensuring compliance and leveraging complete tax benefits.
The qualifying R and D activities are:-
- Tech companies innovating software, AI, and other digital solutions
- Manufacturing industry
- Life science firms (medical or biotech and pharmaceuticals)
- Fintech firms
- Sectors such as robotics, customer service software, engineering
The Key Features of the R & D Tax Credit
- Who’s eligible? The companies involved in qualifying activities.
- Structure: The tax credit percentage changes with the number of employees and revenue of the company thereby fostering innovation for companies of all sizes.
- Adherence to the Country’s vision: This program focuses on sustainable development, economic progress, and technological development while aligning with UAE Vision 2030 and OECD guidelines.
Key benefits of R and D Tax Credit
R & D Tax Credit allowance provides several benefits to businesses such as:-
- Save Financial Cost: This program helps to reduce the financial burden of R and D innovations.
- Enhanced Innovation: This tax credit helps to motivate businesses to promote innovation.
- Competitiveness: R and D tax credit helps to strengthen the UAE as a global leader in innovation and technology, enabling it to be competitive in the global market.
- Support for growth: This initiative helps to take more opportunities while contributing to long-term development and growth.
Key Projection: Economic Forecast of UAE’s corporate tax incentive
Let us dive into some data and projections of corporate tax credits.
- R&D Investment Growth
With the rise of the R&D tax credit, it is expected to
- Boost 20% hike in corporate R&D Investment in the next 5 years.
- Enhance innovation by generating more than 1,000 patents every year by 2028.
- High-Value Employment Growth
The high-value employment tax credit aligned with the R&D tax credit allowance is about to:
- 15% Increase in the number of skilled professionals in the UAE by 2030.
- An additional AED 25 billion contributed to the national GDP annually to improve productivity.
BMS is here to help your business tap into the many opportunities offered by the UAE tax credit and R&D initiatives.
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