The two countries have also raised fuel prices while exempting medicine, school fees, residential rents and medical fees from the VAT.
The tax was introduced in a bid to boost revenue after a persistent slump in the price of oil in 2017 that entailed deepening budget deficits for both the UAE and Saudi Arabia.
The decision also marks a major shift in the two super-rich countries, where glitzy shopping malls are regarded by bargain-hunting visitors as among the main tourist attractions.
Analysts forecast that the added 5 percent tax hike could see the Saudi Kingdom and UAE raise a combined amount of $21 billion in 2018 alone, equivalent to around 2% of gross domestic product.
The remaining four Gulf countries — Bahrain, Kuwait, Oman and Qatar — have also stated their intention to introduce VAT but have postponed the move until 2019 at the earliest.
Saudi Arabia and the UAE last summer imposed a 100% tax on tobacco products and energy drinks, and a 50% tax on soft drinks.
The IMF has recommended oil-exporting countries in the Gulf to introduce taxes as one way to raise non-oil revenue. The IMF also recommends Gulf countries to introduce or expand taxes on business profits.