Zakat on Salary in UAE

UAE Labor Law: UAE labor law mandates end of service gratuity based on length of service and basic salary. After completing one year, you earn 21 days of basic salary for each year of the first five years, then 30 days per year thereafter. This gratuity accumulates with your employer but is only paid when employment ends.

Islamic ruling on accruing gratuity: While end of service gratuity is accumulating with your UAE employer, it is not yet in your possession and you do not have control over it. Therefore, accruing gratuity is not zakatable during employment. The Islamic principle is that Zakat applies to wealth you possess and can access. Money your employer owes you but has not paid is not yet your wealth for Zakat purposes.

When gratuity becomes zakatable: Once you resign, complete your contract, or are terminated and your UAE employer pays your end of service gratuity into your bank account, it becomes your possessed wealth at that moment. From the date you receive gratuity payment, if you keep it above nisab for one complete lunar year, you must pay 2.5% Zakat on it. The hawl for gratuity begins when you receive payment, not when it was accruing.

Annual leave accrual: UAE employees accrue annual leave days, and some receive annual leave salary if unused days are paid out. Additionally, many UAE contracts include annual air ticket allowances for repatriation visits home. These are salary components that affect Zakat calculation.

Cash leave salary: If your UAE employer pays you cash for unused annual leave (either during employment or at contract end), this cash payment is part of your salary income. Include it in your zakatable wealth when calculating Zakat. If you receive AED 15,000 for unused leave days and save this amount, it becomes part of your accumulated salary savings subject to Zakat.

Ticket allowances: If you receive cash ticket allowance (perhaps AED 5,000 to 10,000 annually) and you use cheaper flights or do not travel, saving the difference, those savings are zakatable. If your employer books and pays for tickets directly without giving you cash, this is a non-cash benefit and not zakatable. Only cash allowances you receive and can save are part of your zakatable UAE salary income.

Bonus structures in UAE: Many UAE employers offer performance bonuses, annual bonuses, sales commissions, and incentive payments as part of total compensation. These can be substantial, sometimes equivalent to several months of salary, particularly in finance, real estate, sales, and executive positions.

Zakat on bonus income: All bonus payments from your UAE employer are part of your total salary income for Zakat purposes. Whether you receive AED 50,000 annual bonus, AED 20,000 quarterly incentive, or commission-based variable income, include all accumulated savings from these payments in your annual Zakat calculation. See our Bonus Income guide for detailed treatment.

Variable income consideration: Income variability does not change Zakat calculation method in UAE. Whether your total annual compensation is predictable or varies significantly based on performance, the Islamic method remains the same: calculate Zakat once per lunar year on all accumulated wealth from all salary and bonus sources combined.

Family benefits in UAE: Some UAE employers, particularly government entities and large corporations, provide education allowances for employees' children to cover school fees. These allowances can be substantial given Dubai and Abu Dhabi international school costs.

Cash versus direct payment: If you receive education allowance in cash (perhaps AED 60,000 annually) and you save portions by choosing less expensive schools or having fewer children than the allowance covers, those savings from your UAE salary are zakatable. If your employer pays school fees directly to the institution without giving you cash, this is a non-cash benefit and not zakatable.

Other family allowances: Some contracts include children's allowances (AED 500 to 1,000 per child monthly), dependent allowances, or spousal allowances. All cash allowances you receive are part of your total UAE salary. Accumulated savings from any allowances must be included in your annual Zakat calculation when above nisab for hawl.

UAE expat reality: Millions of Muslims work in UAE as expats, sending substantial portions of their tax-free salary home to support families in India, Pakistan, Bangladesh, Philippines, Egypt, Jordan, and dozens of other countries. This is a noble Islamic duty of family support.

Zakat on remittances: Money you send home for immediate family expenses is spent income, not zakatable. If you send AED 5,000 monthly to parents for their living costs, that money is an expense similar to your own rent and food. However, if you send money home and it accumulates in savings accounts there, those accumulated savings are zakatable when they remain above nisab for hawl.

Distinguishing support from savings: Be honest in your Zakat calculation. If you send AED 10,000 monthly home and your family saves AED 3,000 of it monthly in an account under your name, that accumulating AED 3,000 monthly is your wealth. Include total savings in both UAE and home country when calculating Zakat on your UAE salary derived wealth. Our Zakat on Income guide explains income versus accumulated wealth.

Currency diversity: UAE expats often maintain accounts in multiple currencies: AED for daily expenses, home currency for remittances and savings, USD for investment accounts, and sometimes EUR or GBP. Managing Zakat across currencies requires understanding exchange rate treatment.

Islamic method for currency conversion: Convert all wealth to one consistent currency on your Zakat date using the exchange rates on that specific day. If your Zakat date is 1st Ramadan 1447 and on that day AED to PKR is 75.50, AED to INR is 22.80, and AED to USD is 0.272, use these exact rates to convert all your savings to one currency for calculation.

Practical approach: Most UAE Muslims calculate in AED since it is their primary income currency. Total your AED accounts, convert home currency savings to AED, convert USD investments to AED, and calculate Zakat on the combined AED total. This simplifies tracking year over year. You can also use our multi-currency Zakat calculator.

Long-term expat planning: Many Muslims work in UAE temporarily, saving aggressively for eventual return home. You might accumulate substantial wealth from your tax-free UAE salary specifically for purchasing property, starting a business, or retirement in your home country.

Zakat on future-designated wealth: The purpose you designate for savings does not exempt them from Zakat. If you accumulate AED 500,000 from your UAE salary over five years intending to buy a house upon return home, that AED 500,000 is zakatable wealth. The Islamic principle is that all surplus wealth above nisab for hawl is zakatable regardless of your intentions for its future use.

Planning for Zakat: Include annual Zakat payments in your UAE financial planning. If you save AED 100,000 annually from your tax-free salary, budget for approximately AED 2,500 annual Zakat (2.5%) in your projections. This ensures Zakat fulfillment does not disrupt your long-term savings goals while maintaining Islamic compliance.

UAE employment mobility: Muslims in UAE frequently change jobs for better opportunities, sometimes having brief unemployment periods between positions. These transitions affect salary flow but not Zakat principles.

Zakat during job transitions: Your Zakat date remains the same regardless of employment status. If you lose your job or change employers, calculate Zakat on your normal annual date based on whatever wealth you have accumulated at that moment. If savings dropped below nisab during unemployment, no Zakat is due. If you maintained wealth above nisab despite job loss, Zakat is still obligatory.

Severance and final settlements: When leaving UAE employment, you receive end of service gratuity, final salary, leave encashment, and final settlements. All these payments are income in the month received. Include them in your total wealth on your next Zakat date. If you receive AED 80,000 final settlement and save it, calculate Zakat on this accumulated amount when your Zakat date arrives.

Dubai salary market: Dubai offers diverse employment from hospitality, tourism, real estate, finance, trade, and free zone companies. Salaries vary dramatically by sector and company size, from AED 3,000 monthly for entry positions to AED 100,000+ for executive roles.

Cost of living impact: Dubai has high living costs, especially accommodation. A salary that seems substantial might leave limited savings after rent, school fees, and expenses. For Zakat on salary in Dubai, what matters is not your gross salary but how much you actually accumulate above nisab for one lunar year. If high costs consume your entire UAE salary with no surplus savings, you have no Zakat obligation.

Free zone employment: Dubai free zones like DIFC, JAFZA, and DMCC offer employment with similar tax-free salary structures. Free zone employment does not create different Zakat rules. Calculate Zakat on accumulated wealth from free zone salary the same way as mainland Dubai employment.

Abu Dhabi compensation: Abu Dhabi, particularly government entities like ADNOC, ADIA, Mubadala, and government departments, often offers higher base salaries and more comprehensive benefits packages than Dubai. Total compensation can be substantial, increasing likelihood of wealth accumulation from salary.

Government benefits: Abu Dhabi government and semi-government positions include extensive allowances: housing (often AED 10,000 to 20,000+), education for multiple children, annual leave tickets, furniture allowance, and more. All cash allowances are part of your total UAE salary for Zakat. Non-cash benefits like provided housing are not zakatable.

Higher Zakat likelihood: The generous compensation in Abu Dhabi government sector means Muslims in these positions often accumulate substantial wealth from salary. Be diligent in calculating Zakat on your accumulated savings from Abu Dhabi employment, as the tax-free generous packages are blessings that carry Islamic obligations of purification.

Sharjah employment landscape: Sharjah and northern emirates (Ajman, RAK, UAQ, Fujairah) generally have lower salaries than Dubai and Abu Dhabi but also significantly lower costs of living, particularly for accommodation. Net savings potential can be similar despite lower nominal salaries.

Zakat on modest salaries: If you earn AED 8,000 monthly in Sharjah and save AED 2,000 monthly due to lower costs, your annual savings are AED 24,000. This is above silver nisab (approximately AED 2,800) and requires Zakat. Modest UAE salary in northern emirates does not exempt you from Zakat if you accumulate savings above nisab for hawl.

Cross-emirate employment: Some Muslims live in Sharjah or Ajman while working in Dubai for cost savings. This geographic arbitrage increases savings from Dubai salary. Calculate Zakat on total accumulated wealth regardless of which emirate you live or work in. The UAE is one country with consistent Zakat principles across all seven emirates.

Energy sector compensation: UAE oil and gas sector, particularly offshore and specialized technical roles, offers premium compensation with rotation schedules, hazard allowances, offshore allowances, and substantial benefits. Total annual packages can exceed AED 500,000 to 1,000,000.

Rotation and savings: Offshore rotation schedules (like 28 days on, 28 days off) often lead to high savings rates. Limited spending opportunities during offshore periods mean more salary accumulates into savings. Include all offshore allowances, rotation premiums, and hazard pay in your total UAE salary when calculating accumulated zakatable wealth.

Lump sum payments: Oil and gas contracts sometimes include lump sum mobilization bonuses, completion bonuses, or project completion payments. These are salary income. When you receive substantial lump sums, include them in your wealth calculations on your next Zakat date. Large bonuses significantly increase zakatable wealth from your UAE employment.