FTA Decision No. 6 of 2026 introduces a mandatory independent audit report for Qualifying Free Zone Persons carrying out distribution activity. Here’s what it requires and by when.
UAE Corporate Tax Insight | July 2026
The Federal Tax Authority has raised the compliance bar for Qualifying Free Zone Persons (QFZPs) that operate distribution businesses out of designated zones. Under Federal Tax Authority Decision No. 6 of 2026, issued on 2 June 2026, these entities will now need to obtain independent verification of their qualifying activity — a first for the Corporate Tax regime’s Free Zone framework.
The rule applies to tax periods starting on or after 1 January 2026, and is limited to the “distribution of goods or materials” qualifying activity. Other qualifying activities are unaffected.
What’s changing
Previously, a QFZP distributing goods from a designated zone could rely on internal assessment to support its 0% Corporate Tax position. Going forward, that self-assessment must be backed by an agreed-upon procedures (AUP) report, prepared by an independent auditor — either the company’s existing statutory auditor or another UAE-licensed practitioner — following the international standard for such engagements (ISRS 4400).
The AUP report has to positively confirm two things:
Customers receiving the goods are genuine resellers (they go on to sell the goods, whether as-is or after further processing).
Any goods physically imported into the UAE by the QFZP entered the country through a designated zone.
The evidence trail businesses now need
To support the auditor’s testing, QFZPs will need a documented paper trail covering two areas:
Proving customers are resellers — trade licences showing resale activity, written declarations from customers confirming the goods are for resale (or donation to a public benefit entity), and supporting commercial records such as invoices, purchase orders and sales contracts.
Proving goods entered via a designated zone — customs clearance and import declarations, plus transport documentation (bills of lading, airway bills, or equivalent) confirming the routing.
The auditor’s procedures will mirror this evidence base: checking licences and declarations, tracing sales documentation, confirming designated zone status, and reviewing internal logistics records like inventory and warehousing logs.
How much has to be tested
The decision prescribes a statistical sampling approach rather than leaving sample size to the auditor’s discretion:
Sample size = Population ÷ [1 + (Population × 0.10²)]
The margin of error is fixed at 10%, and the population is the full count of customers, sales agreements, or import transactions in the period, depending on what’s being tested. Auditors are directed to prioritise the highest-value transactions when selecting the sample.
Timing is tight
The AUP report is due to the FTA within 30 days of the Corporate Tax return filing deadline for the relevant period (subject to any alternative date the FTA may set). Miss it, and the consequence is severe: the QFZP is treated as failing to meet the conditions for the distribution qualifying activity altogether — putting the 0% tax treatment at risk.
What businesses should be doing now
Engage your auditor early. The AUP engagement needs to be scoped, resourced and timetabled well before the filing deadline — this isn’t something to start after year-end close.
Start the evidence-gathering now. Reseller declarations and designated-zone import documentation often sit with different teams (sales, logistics, customs) — pulling it together takes lead time.
Check in with your designated zone authority. Confirming the zone’s designated status and understanding its record-keeping expectations should happen before the audit fieldwork starts.
Review the supply chain and customs process end-to-end. Gaps in documentation practices are easier to fix now than to explain later.
Multinational groups in scope for Pillar Two should weigh the compliance cost of maintaining QFZP status against their exposure under the UAE’s Domestic Minimum Top-up Tax rules — for some groups, the calculus may have shifted.
This summary is for general information purposes. Please speak to your tax advisor about how Decision No. 6 of 2026 applies to your specific structure and operations.
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