UAE's Ministry of Finance has launched a public consultation on R&D tax incentives.
You have until 14 May 2024 to submit your comments.
Public Consultation on Potential Research and Development Tax Incentives in the UAE, Ministry of Finance.
Consideration of a potential R&D tax incentive
In changing markets, businesses typically engage in R&D to drive innovation, acquire a competitive advantage, and increase profitability. However, R&D benefits often extend beyond the business that performs the R&D.
Private sector under-investment in R&D can be attributed to a variety of factors, including the high costs of undertaking R&D, uncertainty of outcomes, and time to realize the return on investment.
Therefore, in order to align the benefit attained from R&D to the business undertaking it and incentivize R&D investment, governments generally intervene to address the underinvestment in R&D by businesses by providing support through direct instruments, such as grants, or indirect instruments, such as tax incentives. It is generally believed that tax incentives are effective because they reduce tax costs while giving businesses greater predictability and consistency.
As part of creating a vibrant and diverse economy, the UAE government recognizes the wider benefits of businesses investing in R&D.
Under the Corporate Tax Law, the UAE Government may introduce a R&D tax incentive to maximize these benefits. By reducing the effective cost of undertaking R&D, the potential R&D tax incentive aims to support the private sector while being accessible to a wide range of UAE businesses.
Aim of the consultation
During this public consultation, the potential R&D tax incentive will be adapted to meet the needs of businesses in the UAE. A Consultation Paper on R&D Principles details the definition, characteristics, and typical activities of R&D functions and contains questions on various aspects of the design features of a potential R&D tax incentive.
R&D tax incentives are being designed with the following features in mind:
Definition of R&D;
Qualifying businesses;
Qualifying R&D activities;
Qualifying R&D expenditure;
Type(s) and form(s) of incentive;
How unutilized benefits will be treated; and
Administrative measures.
You are invited to submit your feedback on this consultation by 14 May 2024, and we would appreciate if you could provide examples, data, or other information to support your views.