R&D Tax Incentives in the UAE – A Digital Consultation Initiative

As a part of the Ministry of Finance, UAE (MoF) beliefs of importance of the co-operation between the MOF and all stakeholders of the business community in UAE, MOF has introduced a Digital Public Consultation started at April 19^th, 2024 to May 14^th , 2024, to discuss the potential implementation of an R&D Tax Incentive under the corporate tax law . This consultation aims to seek input from stakeholders on the following aspects :

• to understand the scope of R&D activities undertaken by the businesses in the UAE.
• potential activities that R&D Tax Incentive may cover.
• potential implementation and administration of the R&D Tax Incentive

Considering that the R&D incentive would be a new concept in the UAE , the MoF finds it imperative to assist the stakeholders with an understanding of the definitions for activities may laid under the purview of the R&D through a guidance paper.

Accordingly, the consultation consists of two parts:

1. Consultation Questionnaire: the MoF has enlisted a series of questions for more clarity of the stakeholders’ business’s current as well as future R&D practices, to identify what the potential R&D Tax Incentives would encompass and how it may be implemented and managed.
2. Guidance Paper: The MoF has laid down the internationally recognized definition of R&D outlined in the OECD’s “Frascati Manual” along with the fundamental characteristics of R&D, including its types and distinguishing features such as :

• Categories of R&D : Basic Research, Application-Oriented Research, and Experimental research.
• Characteristics of R&D : Novel, Creative, Uncertain, Systematic, Transferable & Reproducible
• Bifurcation of activities :
  • Identification of common R&D activities: such as lab research, transforming research outcomes, conducting tests, etc.
  • Identification of activities excluded from R&D: such as engineering and scientific activities  
  • Activities connected to science and technology.
• Methods of identification of R&D Projects i.e. the MoF apprises the stakeholders on the following aspects :
  • Objectives of the projects
  • Newness of the projects
  • Methods to implement the projects.
  • Applicability of the project outcome in general
  • Type of staff involved in the project.
  • Classification of research projects and research institutions

We hope our readers find this insightful

Relevant links from the MoF :

Source : https://u.ae/en/participate/consultations/consultation?id=3621

Guidance paper : https://mof.gov.ae/wp-content/uploads/2024/04/Guidance-Paper-on-the-Foundations-of-RD.pdf

Disclaimer: The Content offer general guidance and should not be considered legal, financial, or tax advice. Consult qualified professionals for personalized guidance. While efforts have been made to ensure accuracy, no guarantee is provided for completeness or applicability to individual situations. Users are responsible for their interpretation and actions based on this information, at their own risk.

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