UAE Construction Firms Urged To Map R&D Activity As Tax Credits Offer up to 50% Relief

20 May 2026 • 4 min read

UAE construction firms could claim tax credits of up to 50% under the country’s new research and development regime, provided they can identify and document qualifying innovation.

The framework, introduced under Ministerial Decision No. 24 of 2026 and effective from January 1, allows companies to claim tax credits on eligible R&D spending. The relief ranges from 15% to 50%, depending on the level of expenditure and the number of employees involved in research and development.

However, advisers warn that many companies in the sector may miss out unless they start identifying eligible projects and documenting them from the outset.

Eligible Construction Innovation

According to Dhruva, a Ryan affiliate, construction businesses are particularly well-positioned to benefit from the incentive because innovation is already deeply embedded across large parts of the industry.

Potentially eligible activities include the development of low-carbon concrete and smart materials, modular construction and prefabrication systems, BIM software, and digital twins. AI-based project management tools, robotics, drones, and sustainability technologies may also fall within the scope of the regime.

The construction sector innovates constantly, in materials, in methods, in software, in safety. The challenge is that much of this activity has never been labelled R&D, and therefore never documented as such.

Nimish Goel

Leader Middle East at Dhruva, a Ryan LLC affiliate

He said companies that begin mapping eligible activities now and building the evidence trail required under the regime will be better positioned to capture the benefits when claims are submitted.

Qualification Criteria

To qualify, projects must meet five criteria aligned with the OECD Frascati Manual: novelty, creativity, technical uncertainty, systematic execution, and reproducibility.

For construction companies, the key distinction is between routine project delivery and structured experimentation designed to address technical challenges.

Applying an existing construction method to a new project does not qualify. However, developing and testing new materials, systems, or technologies through a documented process may fall within the scope of the regime.

Credit Rates And Headcount

The financial benefit rises with both the eligible expenditure and the number of employees involved in R&D.

The first AED 1 million of qualifying expenditure attracts a 15% tax credit if the company has at least two R&D employees.
Spending between AED 1 million and AED 2 million can qualify for a 35% credit where at least six staff are involved in R&D.
Expenditures between AED 2 million and AED 5 million may receive a 50% credit if the company has at least 14 employees engaged in R&D activity.

Where the minimum headcount requirement is not met, the credit rate is reduced. The regime also provides a 30% uplift on staff costs included in qualifying expenditure.

Dhruva said this structure means workforce planning will become an important part of tax strategy for contractors, engineering groups, developers with in-house technical teams, and companies investing in digital construction or sustainability-led innovation.

Roles such as materials scientists, structural engineers, software developers and robotics specialists could influence whether a business qualifies for higher rates of relief.

Documentation Requirements

Companies must obtain pre-approval before claiming the credit and maintain records of research objectives, methodologies, testing and outcomes for seven years.

Dhruva said construction firms will therefore need to record R&D activity from the start of a project, rather than attempting to reconstruct evidence later.

The firm also warned that construction groups using shared engineering or technology platforms should review how costs are allocated, as intra-group transactions are excluded from qualifying expenditure under the rules.

Next Steps For Companies

Goel said the framework represents more than a tax incentive, describing it as a structural shift in how innovation is recognised within the construction sector.

For construction businesses, the immediate priority is to identify eligible projects, assign internal responsibility for R&D documentation and build systems to track qualifying costs, personnel and technical outcomes.

The message for the sector is clear: the relief is available, but only to companies that can prove their innovation was structured, documented and properly costed from the start.

Anna Fischer

Construction Content Writer

Anna has background in IT companies and has written numerous articles on technology topics.

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