Research and experimental development on natural sciences and engineering

Activity 721 falls under Qualifying Intellectual Property. Forensic audit focuses on the 'Qualifying Expenditure' vs 'Overall Expenditure' ratio. Income derived from patents or equivalent rights is taxed at 0% only if the R&D was physically performed by the QFZP or outsourced to a resident third party within the UAE. Routine engineering services misclassified as R&D will be re-characterized as non-qualifying income.

Audit Red Flag

Inclusion of non-qualifying R&D expenditures or 'uplift' costs that exceed the 30% cap in the Nexus Ratio calculation.

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