FTA Decision No. 6 of 2026: New AUP Rules for QFZP Distributors

What FTA Decision No. 6 of 2026 Introduces

The Federal Tax Authority issued Decision No. 6 of 2026 on 2 June 2026, setting out additional compliance procedures for a specific group of free zone businesses: Qualifying Free Zone Persons engaged in the distribution of goods or materials in or from a Designated Zone. The decision applies to tax periods commencing on or after 1 January 2026.

In practical terms, it introduces a new, mandatory report that certain free zone distributors must obtain from an independent external auditor before they can rely on the 0% Corporate Tax rate for their distribution income. The report is not a full audit opinion. It is a narrower engagement known as an Agreed-Upon Procedures report, and the decision is unusually detailed about exactly what the auditor must check, how much evidence to review, and when the report is due.

Background: Qualifying Free Zone Persons and the Distribution Activity

Under the UAE Corporate Tax Law, a Qualifying Free Zone Person can apply a 0% Corporate Tax rate to its Qualifying Income, provided it continues to meet a set of ongoing conditions. One of the recognised Qualifying Activities under Ministerial Decision No. 229 of 2025 is the distribution of goods or materials in or from a Designated Zone, a category that covers a large share of the UAE’s free zone trading sector.

This activity has always carried a specific requirement: the goods being distributed must be resold, processed, or altered by the customer for onward sale, rather than consumed by the customer directly, and any imports must physically enter the UAE through a Designated Zone. FTA Decision No. 6 of 2026 does not change these underlying conditions. What it changes is how a business proves it is meeting them.

This is separate from, and additional to, the general audited financial statement requirement introduced under Ministerial Decision No. 84 of 2025, which already applies to every Qualifying Free Zone Person regardless of activity. A distribution business will typically need both: its standard annual audited financial statements to support its overall Qualifying Free Zone Person status, and now an Agreed-Upon Procedures report specifically addressing reseller status and Designated Zone importation. The two engagements can be carried out by the same auditor, but they are not the same deliverable.

Who This Decision Applies To

The decision applies to Qualifying Free Zone Persons whose Qualifying Activity is the distribution of goods or materials in or from a Designated Zone, as defined under paragraph (l) of Clause 1 of Article 2 of Ministerial Decision No. 229 of 2025. This will typically include trading and distribution companies operating from Designated Zones that supply goods to customers who resell them, rather than end consumers purchasing for their own use.

It does not apply to every Qualifying Free Zone Person. Businesses earning Qualifying Income from other recognised activities, such as manufacturing, headquarters services, or fund management, are not directly affected by this particular decision, though they remain subject to the general audited financial statement requirement under Ministerial Decision No. 84 of 2025.

What Is an Agreed-Upon Procedures (AUP) Report?

An Agreed-Upon Procedures report, or AUP report, is a defined type of engagement performed under International Standard on Related Services (ISRS) 4400. Unlike a statutory audit, the auditor does not form or express an opinion on whether something is fairly stated overall. Instead, the auditor carries out a specific list of procedures set by the engaging party, in this case the FTA itself, and reports the factual findings against each one.

This distinction matters. A statutory audit results in an opinion the reader can rely on broadly. An AUP report results in a set of factual statements: what was checked, how it was checked, and what was found. The reader, in this case the FTA, draws its own conclusions from those facts.

Under the decision, the AUP report can be prepared by the same external auditor already responsible for the business’s annual audit, or by any other independent auditor licensed in the UAE.

What the Auditor Must Verify: Reseller Status

The first thing the AUP report must establish is that the business’s customers genuinely qualify as resellers, meaning they resell the goods or materials, or parts of them, or process or alter them for the purpose of sale or resale. The decision sets out three specific procedures the auditor must perform to test this, applied to a sample of the business’s customers:

• Inspecting a sample of customer trade, business, or commercial licences to confirm the listed activities include trading, wholesaling, retailing, distributing, manufacturing, or other activities consistent with reselling
• Obtaining signed, dated written declarations or confirmations from a sample of customers affirming their status as resellers for the relevant tax period
• Reviewing a sample of executed sales agreements, invoices, and other transactional records for terms or features consistent with onward sale, such as bulk quantities, resale conditions, or pricing structures typical of a reseller

For each procedure, the auditor documents whether the evidence reviewed is consistent with genuine reseller activity.

What the Auditor Must Verify: Designated Zone Importation

The second element the AUP report must address applies where the business imports goods or materials itself. The auditor must confirm that any such imports entered the UAE through a Designated Zone specifically, not simply through any point of entry into the country. Three procedures apply here:

• Inspecting a sample of import documentation, including customs declarations, import permits, sales contracts, and bills of lading, to confirm entry through a Designated Zone
• Confirming with the relevant Free Zone Authority that the specific zone, port, or area named in the import documentation is formally recognised as a Designated Zone under applicable Cabinet Decisions
• Inspecting internal records, including inventory logs, warehousing reports, and goods movement documentation, to confirm the goods were received, handled, or stored within a Designated Zone before distribution

How Sample Sizes Are Calculated

The decision does not leave sample size to the auditor’s judgement. It prescribes a statistical formula: the sample size equals the sample population divided by one plus the sample population multiplied by the margin of error squared, with the margin of error fixed at 10%. The sample population is the total number of customers, sales agreements, or imports relevant to the specific procedure, and the sample itself must be weighted toward the highest-value transactions in the relevant tax period.

This means the higher a business’s transaction volume, the more individual customer files, declarations, and import records the auditor will need to review to satisfy the required sample size, even though the proportion of the total population being tested falls as volume increases.

Documentation Businesses Need to Prepare

Because the auditor’s findings depend entirely on the documentation available, businesses affected by this decision should have the following organised and accessible before the audit begins:

• Valid trade, business, or commercial licences for their customer base, or equivalent documents indicating resale activity
• Signed and dated declarations from customers confirming their intention to resell, process, or alter purchased goods
• Sales agreements, invoices, and purchase orders that clearly evidence onward sale terms
• Import declarations, customs clearance records, and shipping documents such as bills of lading or airway bills
• Inventory, warehousing, and goods movement records showing receipt and storage within a Designated Zone

Businesses that have not historically collected signed reseller declarations from customers, in particular, may need to introduce this as a new standard practice ahead of their next AUP engagement.

Submission Deadline and Process

The AUP report must be submitted to the FTA no later than 30 days following the deadline to file the Corporate Tax return for the relevant tax period, unless the FTA specifies a different date. Since the Corporate Tax return itself is generally due within 9 months of the end of the financial year, this effectively gives businesses a firm, calculable date by which the report needs to be finalised and filed, working backward from their own financial year end.

Consequences of Non-Compliance

The decision is direct about what happens if the report is not submitted. Where a Qualifying Free Zone Person fails to submit the AUP report within the required window, the conditions for treating the distribution activity as Qualifying Income under Ministerial Decision No. 84 of 2025 and Ministerial Decision No. 229 of 2025 are treated as not having been met.

In practice, this means the income from that distribution activity loses its eligibility for the 0% Corporate Tax rate for the relevant period, regardless of whether the underlying business genuinely met the reseller and Designated Zone conditions. The report itself, not just the underlying facts, is now a condition of the tax treatment.

How Businesses Should Prepare

Given the sampling formula, the documentation requirements, and the fixed submission deadline, businesses affected by this decision benefit from treating the AUP engagement as a planned, recurring part of their annual compliance calendar rather than a last-minute task. Practical steps include reviewing customer files now to identify gaps in trade licence records or missing reseller declarations, introducing a standard signed declaration as part of onboarding new distribution customers, and confirming with the relevant Free Zone Authority that the specific zone used for imports is formally recognised as a Designated Zone.

Coordinating the AUP engagement with the existing annual audit, where the same auditor performs both, can also reduce duplication of document requests and give a clearer combined view of compliance across both the financial statements and the Corporate Tax position.

It is also worth reviewing customer contracts and onboarding processes for opportunities to build reseller documentation into the relationship from the outset, rather than retrofitting it later. A business that routinely captures a customer’s trade licence and a signed resale declaration as part of standard account setup will find the annual AUP sampling process considerably faster than one attempting to gather this information retroactively across a full tax period’s worth of transactions.

How Farahat & Co. Can Help

Farahat & Co. supports Qualifying Free Zone Persons with Agreed-Upon Procedures reports under FTA Decision No. 6 of 2026, alongside broader Corporate Tax compliance, external audit, and Qualifying Free Zone Person advisory services.

Contact Farahat & Co. today to discuss your Agreed-Upon Procedures report requirements.