Construction companies across the UAE may be overlooking one of the most valuable outcomes of the country’s new R&D Tax Credit regime. Introduced under Ministerial Decision No. 24 of 2026 and effective from January this year, the framework offers credits of 15% to 50% on qualifying R&D expenditure. 

Yet, according to Dhruva, a Ryan Affiliate, many construction businesses have yet to identify the full extent of qualifying activity or put in place the processes required to claim these benefits.

Construction sector key beneficiary

As one of the UAE’s most economically significant sectors, construction is uniquely positioned to benefit from the regime. Innovation in this sector is continuous, spanning materials, construction methods, digital tools and safety systems but much of it has historically not been classified or documented as R&D.

"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. That is precisely where value is being left on the table," remarked Nimish Goel, Leader Middle East at Dhruva.

"Companies that begin mapping their qualifying activities now, and build the evidence trail the regime demands, will be the ones positioned to capture this benefit when it matters most," he noted.

To qualify under the regime, R&D activities must meet five criteria aligned with the OECD Frascati Manual: they must be novel, creative, uncertain in outcome, systematic, and transferable or reproducible. 

For construction businesses that approach innovation with defined objectives, structured experimentation and documented results, a wide range of activity meets this threshold.

In practice, qualifying activity in the construction sector can include the development of advanced materials such as low-carbon concrete and smart composites, experimentation with modular construction techniques and prefabrication systems, and proprietary software development for Building Information Modelling (BIM), digital twins and AI-driven project management. 

Sustainability innovation also qualifies, including net-zero building systems and passive cooling technologies suited to UAE conditions, as does the adoption of robotics and drone-based construction and inspection methods.

The critical distinction lies between routine construction activity and genuine R&D. Applying an established methodology to a new project does not qualify. Systematically resolving technical uncertainty through experimentation and documenting that process does.

Dual-threshold structure 

A distinguishing feature of the UAE regime is its dual-threshold structure. Each credit tier requires businesses to meet both a minimum level of qualifying expenditure and a minimum average R&D headcount. 

The first AED1 million of qualifying spend attracts a 15% credit with at least two R&D staff; spend between AED1 million and AED2 million qualifies for 35% with at least six staff; and spend between AED2 million and AED5 million attracts 50% with at least 14. Where headcount thresholds are not met, the applicable credit rate is reduced accordingly.

For construction companies, this makes workforce planning integral to tax strategy. Specialist roles including materials scientists, structural engineers working on novel challenges, proptech developers and robotics engineers not only drive innovation but also determine access to higher credit tiers. 

Staff costs additionally benefit from a 30% uplift in qualifying expenditure, further strengthening the case for building dedicated R&D capability.

"This is not just a tax incentive; it represents a structural shift in how innovation is recognised within the construction sector. Businesses that act early will not only benefit financially but also strengthen their long-term technical capabilities," explained Nimish.

The regime, he stated, places significant emphasis on contemporaneous documentation and structured processes. Pre-approval from the relevant authority is mandatory, and businesses must maintain detailed technical records of R&D objectives, methodologies, experiments and outcomes for a period of seven years. 

For construction companies, this requires embedding R&D tracking into project workflows from the outset, rather than attempting to reconstruct evidence retrospectively.

Construction groups operating centralised engineering or shared technology platforms should also review their structures carefully. Intra-group transactions are excluded from qualifying expenditure, making it critical to ensure that R&D costs are appropriately allocated at the entity level.

"The UAE’s construction sector is building the physical infrastructure of a knowledge economy," noted Nimish.

"It is fitting that those who innovate within it now have access to the same calibre of R&D incentive as their counterparts in technology or manufacturing. The question is not whether to engage, but how quickly companies can build the processes to do so effectively," he added.-

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