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

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