UAE End-of-Service Gratuity Explained (2026)

The UAE has no personal income tax, but private-sector employees are entitled to a mandatory end-of-service gratuity — here's exactly how it's calculated.

No Income Tax — But Gratuity Is Mandatory

The UAE has no personal income tax. Instead, private-sector employees are entitled to an end-of-service gratuity under Article 51 of Federal Decree-Law No. 33 of 2021 — a lump sum owed at the end of employment, functioning as a substitute for the retirement/severance systems income-tax-funded countries provide differently.

How Gratuity Accrues

Employees who complete at least one year of continuous service earn 21 days of basic salary for each of the first five years, then 30 days of basic salary for each year beyond five. Since the 2022 law reform, the calculation is identical whether you resign or are terminated, as long as you've completed one full year — a meaningful simplification compared to the old system's resignation penalties.

What's Excluded and Capped

Only basic salary counts — housing, transport, and other allowances, plus bonuses and commissions, are excluded from the calculation. Total gratuity is capped at two years' worth of basic salary, regardless of how many years were worked beyond that.

Common Mistakes

• Assuming resignation reduces gratuity. Since the 2022 reform, resignation and termination are calculated identically after one year of service — this was not always true under the older system.
• Including allowances in the basic salary figure. Only the basic salary component counts; housing and transport allowances are excluded even if they make up a large share of total compensation.
• Forgetting free zones can differ. DIFC and ADGM have their own separate schemes (DIFC uses DEWS) rather than the standard federal gratuity calculation.

Frequently Asked Questions