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UAE considers R&D tax incentives to help SMEs

By Andy Sambidge
Abu Dhabi's Khalifa University of Science and Technology, Mubadala Investment Company and Kelix Bio announce plans to collaborate on R&D into biopharmaceutical technologies Wam
Abu Dhabi's Khalifa University of Science and Technology, Mubadala Investment Company and Kelix Bio announce plans to collaborate on R&D into biopharmaceutical technologies
  • Scheme aimed at smaller companies
  • UAE quest to become innovation centre
  • Emirates R&D Council founded in 2021

The UAE is considering plans for a research and development tax incentive scheme to boost its ambitions to become a regional centre for homegrown innovation.

The Ministry of Finance said it has launched an official consultation on the possible implementation of the tax incentive under the UAE corporate tax law. 

The consultation will be open until May 14 and aims to explore the scope of R&D activities undertaken by businesses in the UAE and what activities an R&D tax incentive may cover.

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The move is part of the UAE’s plans to expand its research sector after launching an R&D governance policy and establishing the Emirates Research and Development Council in 2021.

Wesley Schwalje, chief operating officer of Tahseen Consulting, said the launch of an R&D tax incentive would encourage more SMEs to join the UAE’s “Make it in the Emirates” (MIITE) campaign.

More than $33 billion has been invested by UAE-based companies to develop hundreds of new product lines but most of that has been concentrated among the country’s biggest employers.

“Such industry programmes have a tendency to favour large manufacturers… It is a very involved process to convince SMEs to adopt advanced manufacturing technologies and make them export-ready. An R&D tax incentive to help companies innovate and grow is likely to be needed to ensure impact at all levels,” said Schwalje.

According to a report by EY last year, no GCC countries offer R&D tax incentives, with only Turkey and Tunisia operating such initiatives in the wider Middle East and North Africa although they are commonplace elsewhere in the world.

“As countries devised plans to reinvigorate their economies in the wake of Covid-19, many renewed, expanded or refocused R&D incentive programmes,” said EY.

“These have long been popular with governments as they vie to attract and sustain economic activity in their jurisdiction.”

On Tuesday, Khalifa University of Science and Technology, Mubadala Investment Company and Kelix bio announced plans to collaborate on R&D into advanced biopharmaceutical technologies.

The partnership aims to create local research activities to focus on new therapeutic technologies, including oncology, metabolic disorders, neurobiology, rare diseases, cell and gene therapies and genome-based therapeutics. 

Last year, Abu Dhabi’s Advanced Technology Research Council launched the $200 million ATRC Global Tech R&D Platform to serve as a channel for countries worldwide to tap into the UAE’s technological expertise.

Over the last four years, ATRC has developed a R&D network, with more than 850 researchers from over 70 countries spanning quantum and AI, autonomous robotics and cryptography, as well as advanced materials, propulsion and space technology.

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