No income tax — so the money question is a different one
There is no personal income tax in the UAE. No PAYE, no social security deduction, no annual return for most employees. A salary of AED 20,000 a month is AED 20,000 in your account. That makes the usual take-home calculation trivial — and shifts the real financial question somewhere else entirely: what you are owed when you leave.
Instead of monthly pension contributions, private-sector expatriate employees accrue an end-of-service gratuity, paid as a lump sum on termination under Federal Decree-Law 33/2021. It is the closest thing to a retirement entitlement most UAE employees have, and it is calculated in a way that surprises people.
The rule that halves most people's gratuity
Gratuity is calculated on your basic wage only. The official position is explicit: it excludes allowances such as housing, transport, utilities and furniture. UAE employment contracts routinely split total pay into a modest basic salary plus large allowances — and every dirham moved from basic into allowances reduces the gratuity you will eventually receive, without changing your monthly income at all.
| Total package AED 20,000/month · 10 years' service | Basic wage | Gratuity |
|---|---|---|
| Basic = 100% of pay | AED 20,000 | AED 170,000 |
| Basic = 70% | AED 14,000 | AED 119,000 |
| Basic = 60% | AED 12,000 | AED 102,000 |
| Basic = 50% | AED 10,000 | AED 85,000 |
| Basic = 40% | AED 8,000 | AED 68,000 |
Identical monthly pay, identical service — and a difference of AED 85,000 between the top and bottom rows. A 50/50 basic-to-allowance split, which is common, cuts the gratuity in half. This is the single most consequential line in a UAE employment contract that most candidates never negotiate, because it does not affect the number they see each month. Check yours with the gratuity calculator before you sign, not when you resign.
How the entitlement builds
The formula rewards longer service — up to a point. You earn 21 days' basic wage for each of the first five years, then 30 days for each year after that. Below one year of continuous service there is no entitlement at all.
| Years of service | Gratuity (basic AED 10,000) | Equivalent months of basic pay |
|---|---|---|
| Under 1 year | AED 0 | — |
| 1 year | AED 7,000 | 0.7 |
| 5 years | AED 35,000 | 3.5 |
| 10 years | AED 85,000 | 8.5 |
| 20 years | AED 185,000 | 18.5 |
| 25 years | AED 235,000 | 23.5 |
| 30 years | AED 240,000 | 24.0 — capped |
The law caps total gratuity at two years' wages. On these numbers the cap bites at around 25.5 years of service, after which additional years add nothing. Employers must settle wages and gratuity within 14 days of the contract ending.
VAT is the tax you actually pay
With no income tax, the main consumption tax is VAT at 5% — low by international standards, but it applies to most goods and services. Whether you are adding VAT to a net price or extracting it from a total that already includes it, the arithmetic differs: adding means × 1.05, while removing means ÷ 1.05, not × 0.95. Getting that backwards is the most common invoicing error we see. The VAT calculator does both directions.
What these calculators cover — and what they don't
- Private-sector expatriate employees under Federal Decree-Law 33/2021. UAE and GCC nationals are enrolled in pension schemes instead of accruing gratuity.
- Free zones may differ. DIFC and ADGM operate their own employment regimes — DIFC replaced gratuity with the DEWS funded scheme.
- Unpaid leave is excluded from the service period, and unused annual leave is settled separately.
- Resignation versus termination can affect entitlement in limited-term contracts and in cases of dismissal for cause.
- Voluntary savings schemes that some employers now offer in place of gratuity are not modelled.
Figures follow Federal Decree-Law 33/2021 as published by the UAE Government. If something looks wrong, please tell us — our methodology explains how each calculator is checked before publication.