UAE R&D Tax Credit: What founders need to know before the portal opens

Introductions

**Rahan Alim:** Good morning and thank you for joining us today. This week we have a very special guest in Shoayb Patel. Today we're going to be talking about the UAE R&D tax credit a new initiative announced by the Ministry of Finance where, if you're doing qualifying R&D work, you actually get money back for some of that work.

My name is Rahan Alim. I'm the co-founder of Taxar and also co-founder of Alpha Pro Partners. Taxar is a tax technology company with an invoice product and a corporation tax product, so this topic feeds in well with what we do every day.

Shoayb has a very similar background to myself we're both originally from the UK, we both had accounting firms. He built a business in the UK called RD Vault, which helps businesses prepare and claim R&D tax credits there, and he's now bringing that expertise to the UAE.

We'll have Q&A at the end, so feel free to put your questions in the comments. Shoayb, the floor is yours.

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**Shoayb Patel:** Thanks, Rahan. I'm Shoayb, an ICAEW chartered accountant. My background is in electrical engineering. I've spent over 15 years helping businesses claim R&D tax credits in the UK. I set up RD Vault in 2017, and we've been helping companies from startups and scaleups through to listed businesses ever since.

In this session I'm going to go through things quite fast and be direct. By the end, you'll know exactly whether this credit applies to you.

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## `[3:23]` Why This Matters

The UAE is the first country in the GCC and the wider region to introduce R&D tax credits. Over 60 countries have introduced similar schemes worldwide, including the US, Ireland, France, and Australia. These aren't small economies experimenting; they are countries that have been rewarding innovation for decades.

In the UK alone, businesses have claimed over £70 billion in R&D tax credits since the scheme launched in 2000. That's real money going back into real companies.

The UAE legislation was published on **18 March 2026**. The qualifying period the costs that can be included in a claim covers tax periods starting on or after **1 January 2026**.

I've spent 15 years managing UK R&D claims. The UAE version is structurally not too dissimilar, and the opportunity is just as real bigger in some cases.

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## `[5:06]` What Is the R&D Tax Credit?

You're already spending money on research, technology, or innovation. This credit gives you a percentage of that spend back. It is not a grant and it is not a loan.

**Phase one is currently active.** It is a **non-refundable** credit, meaning it offsets your UAE corporate tax liability. If you're loss-making, you can carry those credits forward and use them against future tax liability.

**Phase two** which is expected but not yet legislated will introduce **cash refunds**. That's when it becomes truly powerful for pre-revenue businesses. Phase two requires a separate ministerial decision, and there is no confirmed timeline or scope yet.

The reason to act now is phase one. Companies that have their records ready when the portal opens will be first to file.

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## `[7:50]` The Numbers Credit Tiers

You can claim up to **AED 2 million in R&D tax credits per year**, across three marginal tiers:

| Tier | Qualifying Spend | Credit Rate | Minimum Staff |
|------|-----------------|-------------|---------------|
| 1 | First AED 1 million | 15% | 2 employees |
| 2 | Next AED 1 million | 35% | 6 employees |
| 3 | Next AED 3 million | 50% | 14 employees |

Each tier requires **both** the spend threshold **and** the staff headcount. If either condition is not met, that tier is blocked.

**Example A:** 2 engineers, AED 950,000 qualifying spend → Tier 1 only → approximately **AED 142,000** credit.

**Example B:** 8 engineers, AED 2.3 million qualifying spend → Tier 1 + Tier 2 unlocked → approximately **AED 500,000** credit.

**Example C:** 14+ engineers, AED 5 million qualifying spend → All three tiers → **AED 2 million** maximum credit.

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## `[11:18]` Do You Qualify? The Three Criteria

1. Your business is registered in the UAE and subject to UAE corporate tax.
2. You have **at least two employees** working on R&D.
3. You are spending **at least AED 500,000** on a qualifying R&D project in that tax period.

If you're loss-making or pre-revenue, the credit carries forward and offsets against future corporation tax liability when you become profitable.

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## `[12:27]` Free Zone Companies

Being in a free zone does not automatically exclude you. What matters is your **tax status**, not your postcode.

You likely **qualify** if your income is subject to UAE corporate tax at 9% either because it falls outside the qualifying income definition, or your group is subject to the domestic minimum top-up tax (Pillar Two).

You likely **do not qualify** if all of your income is taxed at 0%, since there's no tax liability to offset.

**Practical advice:** If you're in a free zone and unsure, establish your tax status before deciding whether to pursue a claim. Everything else follows from that answer.

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## `[16:43]` The Core Technical Test What Is R&D?

Memorise this question:

> *Could a competent professional in your subject domain have predicted the technical outcome in advance of conducting the R&D?*

- If **yes** you probably don't qualify.
- If **no** you probably do.

This is about **technical uncertainty**, not commercial uncertainty. Asking "will customers buy this?" is not R&D. Asking "will this algorithm work?" might be.

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## `[17:49]` The Frascati Manual Five Qualifying Criteria

The UAE legislation explicitly references the OECD's Frascati Manual, the global standard for measuring R&D. Every qualifying activity must meet **all five** of these elements simultaneously:

1. **Novel** You're creating something that didn't exist before. You are not adapting an existing tool or implementing a known solution.
2. **Creative** Original thinking is required. You are not following a fixed specification or simply configuring existing software.
3. **Uncertain** You didn't know at the outset whether it would work. If a competent professional could have predicted the outcome with reasonable certainty, it likely doesn't qualify.
4. **Systematic** You had a plan, objectives, a budget, and records of what you were doing.
5. **Transferable/Reproducible** The results can be applied in other contexts or independently replicated.

**What qualifies:** Novel algorithms, machine learning models where accuracy was genuinely uncertain, fintech infrastructure solving problems where no existing tool existed, drug formulation, biotech assays, clinical-stage experiments.

**What does not qualify:** Standard software development using a waterfall methodology where success is just a matter of time and resource. Configuring existing software. Market research.

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## `[21:17]` Qualifying Costs

**Staff costs:** Salaries, bonuses, and employment costs of your R&D team. This is where most founders will find the bulk of their claim.

**Materials and consumables:** Test materials, computer software, software licences, cloud computing costs used in R&D.

**Subcontractors:** Must be UAE-based, and the activity must be performed in the UAE. Note: subcontracted companies themselves do not count toward your headcount threshold, but the subcontractor's own workers engaged on your project do.

**Important:** Regardless of cost category, you need a minimum of **AED 500,000** in qualifying spend on that project. If you don't hit that threshold, you don't qualify.

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## `[23:09]` The 30% Staff Cost Uplift

On top of actual staff costs, you receive a **30% uplift** written into the legislation.

Example: AED 1 million in actual staff costs becomes AED 1.3 million of qualifying expenditure.

The uplift is applied **after** you've established that you meet the AED 500,000 minimum threshold it does not count toward hitting that threshold.

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## `[25:37]` Pre-Approval Critical Requirement

This is probably the most important point in the entire presentation:

**You need written pre-approval from the Emirates R&D Council before you can file a claim.** This is mandatory. It is not retrospective. It is required per project. Without approval, there is no credit.

- Qualifying costs are effective from **January 2026**.
- The portal is expected to open in **late 2026 or early 2027**.
- The first wave of claims is anticipated around **September 2027**.

The portal is not yet open. You cannot apply today. However, companies can and should start preparing now by collecting documentation.

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## `[27:01]` Four Common Traps for Advisers and Businesses

**1. The Small Business Relief (SBR) trap**
Companies with revenue under AED 3 million may be eligible for SBR. If you elect for SBR in 2026, you do not qualify for R&D tax credits that year. Run the calculation with your accountant before making that election. Note: SBR is expected to end by the close of 2026 anyway.

**2. Lack of contemporaneous records**
Records created at the time the R&D is being carried out carry far more weight than year-end reconstructions. A dated entry in a shared folder is worth more than a polished report written months later. Start documenting now, in whatever system works for you Jira, Monday.com, Google Drive, a shared folder.

**3. Miscounting headcount**
The legislation is precise about who counts as a qualifying employee. UAE-based employees and externally provided workers both count toward your staff threshold. Subcontracted companies themselves do not count, but the subcontractor's own employees working on your project do.

**4. Foreign IP ownership**
If your UAE entity is conducting the R&D but the intellectual property sits with a foreign parent or holding company, the credit may not be available. The UAE entity must be beneficially entitled to exploit the IP. This requires careful consideration and potentially some restructuring.

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## `[29:43]` Four Actions to Take Now

1. **Map your R&D activity.** Write down every project where you didn't know in advance whether it was going to work.
2. **Start tracking costs by project** staff time, materials, subcontractors from today.
3. **Start documenting.** A shared folder, a Google Doc, Jira, Monday.com it doesn't matter what system, just start capturing records contemporaneously.
4. **Talk to your accountant** before they make any SBR election, and flag that you may intend to make an R&D claim.

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## `[30:47]` Q&A

**Rahan:** In the UK, how long does it normally take to get an R&D credit approved, and is there a pre-approval process?

**Shoayb:** In the UK, you must pre-notify HMRC of your intention to make a claim within a set time limit. If you miss that window, you're out of scope entirely. HMRC doesn't pre-approve claims approval is always after the fact. Once submitted, processing typically takes four to eight weeks, depending on the time of year. March and December tend to be the busiest periods. HMRC can open an inquiry into a claim for up to approximately 15 months before losing the right to do so.

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**Rahan:** What's the audit environment like? Are R&D claims scrutinised more heavily?

**Shoayb:** To be direct yes. The UK government found that during the COVID period, approximately £1.13 billion in R&D tax credits was claimed fraudulently, with exaggerated or non-qualifying claims. HMRC found that in some sectors, **one in five R&D claims** were either non-qualifying, exaggerated, or fraudulent.

The UAE has clearly learned from that experience. Rather than dealing with non-compliance after the fact, the pre-approval portal ensures qualification is determined before a claim is filed. That's a smart structural choice.

When inquiries do happen, they typically ask for contemporaneous records of R&D activity, copies of invoices, and documentation showing how staff time was allocated to R&D. In my experience in the UK, inquiries are scoped specifically to R&D and do not routinely spill into VAT or corporation tax.

One additional point: **if you intend to make an R&D claim in the UAE, your accounts will need to be audited.** That is a prerequisite. Whether it requires a special-purpose audit or a general audit is still to be confirmed by the R&D Council.

HMRC also monitors advisers. If a particular adviser consistently attracts inquiries into their clients' R&D claims, HMRC starts scrutinising that adviser's practice. Working with a reputable, experienced R&D tax adviser matters.

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**Question from attendee:** We perform group R&D services where the benefits accrue to overseas entities but the UAE entity bears the cost. Does that qualify?

**Shoayb:** No. The UAE entity must benefit from the exploitation of the R&D in some way. The government would not allow a company to reduce its UAE tax bill on R&D where the resulting revenue is recognised entirely overseas. If the UAE entity has no genuine intention of recognising that revenue, it cannot qualify.

There may be a path via transfer pricing for example, charging royalties at arm's length from the overseas entity back to the UAE entity but that requires proper structuring and qualified advisers to ensure it's commercially defensible.

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## `[41:20]` What RD Vault Is Doing in the UAE

RD Vault is bringing its experience from the UK into the UAE. Since the UAE legislation closely follows the Frascati Manual the same framework used in the UK the expertise translates directly.

**What they do:**
- Appraise whether a business qualifies for R&D tax credits.
- Manage the full pre-approval process with the Emirates R&D Council and FTA when the portal opens.
- Help identify and quantify qualifying R&D costs.
- Provide a platform (already live in the UK, being migrated to the UAE) to track and document R&D costs contemporaneously so companies have records ready if the Emirates R&D Council or FTA requests them.

**What they don't do:** VAT, tax returns, bookkeeping, audits, or general accountancy. R&D tax credits only.

They are currently appraising companies, waiting for the R&D Council portal to open, and publishing regular guidance on their website in the meantime.

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*This webinar has been recorded and is available on YouTube and LinkedIn.*