The Federal Tax Authority (FTA) has introduced a new requirement for Qualifying Free Zone Persons (QFZPs) under FTA Decision No. 6 of 2026. Any QFZP involved in distributing goods or materials in or from a Designated Zone must now obtain an Agreed Upon Procedures (AUP) Report.
This report is a specialized audit engagement designed to prove that the business genuinely meets the conditions of the Free Zone Corporate Tax regime. It focuses on how the business operates, the documents it keeps, and whether it follows the rules for distribution activities.
This guide explains who needs the AUP Report, what the auditor checks, the procedures for verifying reseller status and imports, the documentation QFZPs must maintain, and the sampling method required by the FTA.
Related: Corporate Tax Services in UAE
Who Must Obtain the AUP Report?
The AUP Report applies only to businesses that:
- Qualify as a QFZP
- Carry out distribution of goods or materials in or from a Designated Zone
These businesses benefit from the 0% Free Zone Corporate Tax rate, but only if they meet strict operational and documentation rules.
The AUP Report is the FTA’s way of confirming that the business is a genuine distribution operation and not simply claiming Free Zone benefits without meeting the conditions.
What Is the Role of the Independent External Auditor?
The AUP Report must be prepared by an independent external auditor licensed in the UAE. The auditor follows ISRS 4400, which means:
- The auditor reports factual findings only
- No opinions or assurance are provided
- All evidence reviewed must be clearly documented
- Results must be presented transparently
This ensures the report is objective and consistent with international standards.
Need Expert Advice?
Contact the team at Farahat & Co. for professional support and expert insights for businesses operating in the UAE.
What Are the Agreed-Upon Procedures for Verifying Reseller Status?
A key part of the AUP Report is proving that the QFZP’s customers are resellers, not end-users. To verify this, auditors must:
- Inspect customer trade licenses
- Review signed declarations confirming resale intent
- Examine sales agreements and invoices
- Confirm that customers resell, process, or alter goods for onward supply
These checks show that the QFZP is supplying goods to businesses that genuinely operate as resellers.
Also check: Corporate Tax Audit in UAE
Procedures for Verifying Importation Through a Designated Zone
If the QFZP imports goods, the auditor must confirm that the goods entered the UAE through a Designated Zone. Required procedures include:
- Inspecting import declarations
- Reviewing customs clearance documents
- Checking bills of lading or airway bills
- Confirming Designated Zone status with the Free Zone Authority
- Inspecting internal inventory and logistics records
These steps ensure the business meets import documentation UAE requirements.
Checklist: Documentation QFZPs Must Maintain
QFZPs must keep complete and organized documentation for each tax period. This is essential for both the AUP engagement and Corporate Tax Audit UAE readiness.
Required documentation includes:
- Customer trade licenses
- Signed customer declarations
- Sales agreements and invoices
- Purchase orders
- Import declarations
- Customs clearance documents
- Bills of lading or airway bills
- Inventory logs
- Warehouse movement records
- Logistics documentation
These records form the evidence base the auditor relies on when preparing the AUP Report.
FTA Sampling Methodology
The FTA has introduced a specific formula under FTA Decision No. 6 of 2026 to determine how many documents the auditor must review. This ensures consistency and prevents selective sampling.
Sampling Formula
Sample Size = Sample Population / [1 + (Sample Population × 0.01)]
Where:
- Sample Population = total number of customers, agreements, or imports
- Sample size: the number of relevant documents selected from the sample population for review
- Margin of Error = fixed at 10% (0.10)² = 0.01
Worked Example
A QFZP supplied goods to 250 customers.
- Step 1: Sample Population = 250
- Step 2: Sample Size = 250 / [1 + (250 × 0.01)] = 250 / 3.5 = 71.43
- Step 3: Round up → 72 customers
The auditor must review documents for at least 72 customers, focusing on those with the highest transaction values.
Why Adequate Evidence Matters
Proper documentation is essential for maintaining QFZP status. If a business cannot provide adequate evidence, it may face:
- Loss of QFZP status
- Loss of the 0% Free Zone tax rate
- Taxation at 9% for the relevant period
- Increased audit scrutiny
- Delays in Corporate Tax processing
The AUP Report is mandatory. Non-compliance can lead to significant tax consequences.
Frequently Asked Questions (FAQs)
Who must obtain the AUP Report?
What standard governs the AUP Report?
What documents must be maintained?
What happens if the AUP Report is not submitted?
How is the sample size determined?
Need Expert Advice?
Contact the team at Farahat & Co. for professional support and expert insights for businesses operating in the UAE.
How Farahat & Co. Can Help
Preparing for the AUP engagement requires strong documentation and clear processes. Farahat & Co. supports QFZPs with documentation readiness reviews, verification of reseller evidence, assessment of import documentation, preparation support for the AUP engagement, Corporate Tax compliance reviews, and ongoing advisory to protect QFZP status.
Contact Farahat & Co. today to discuss your AUP Report and QFZP compliance requirements.
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