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FTA DECISION NO. 6 OF 2026
New Agreed-Upon Procedures (AUP) Requirement for Qualifying Free Zone Persons Distributing Goods from a Designated Zone Under UAE Corporate Tax
Effective for Tax Periods commencing on or after 1 January 2026 | Issued 2 June 2026
The Federal Tax Authority ("FTA") has issued Decision No. 6 of 2026, introducing a formal, standardised compliance mechanism for Qualifying Free Zone Persons ("QFZPs") that distribute goods or materials in or from a Designated Zone — a Qualifying Activity under paragraph (l), Clause 1, Article 2 of Ministerial Decision No. 229 of 2025. For UAE Free Zone groups relying on this Qualifying Activity to preserve their 0% Corporate Tax rate on Qualifying Income, this Decision is not a technical footnote; it is a new annual compliance deliverable with a hard deadline and a hard consequence for missing it.
Below, we set out what the Decision requires, who it affects, and the practical steps businesses should take now to be audit-ready.
1. Who Is Affected
This Decision applies specifically to QFZPs whose Qualifying Activity is the distribution of goods or materials in or from a Designated Zone. If your Free Zone entity's 0% Corporate Tax position depends on this particular Qualifying Activity, the new procedures apply to you — in addition to, not instead of, your existing substance, audited financial statements and de minimis requirements.
2. The Core Requirement: A Mandatory Agreed-Upon Procedures Report
For the purposes of Clause 3, Article 2 of Ministerial Decision No. 84 of 2025, a QFZP engaged in this activity must now obtain an Agreed-Upon Procedures ("AUP") report from an independent external auditor — either the entity's statutory auditor or any other independent auditor licensed in the UAE. The report must be prepared in accordance with ISRS 4400, Agreed-Upon Procedures Engagements, as issued by the IAASB.
This is a factual-findings AUP engagement under ISRS 4400 — not an audit opinion and not a reasonable/limited assurance report. The auditor reports only what was found; the QFZP itself remains responsible for meeting the underlying conditions.
3. What the AUP Report Must Demonstrate
The report must document procedures and factual findings covering two limbs:
- Reseller status of customers — that the QFZP supplies goods or materials to customers who resell them (or parts thereof), or who process or alter them for the purpose of sale or resale; and
- Designated Zone importation — that any goods or materials imported by the QFZP entered the UAE through a Designated Zone.
4. Supporting Documentation QFZPs Must Maintain
4.1 Evidence of reseller status
- Valid trade, business, or commercial licenses (or equivalent) indicative of reselling activity
- Signed customer declarations confirming the goods are acquired for sale, resale, or donation to a public benefit entity
- Sales agreements, invoices, and purchase orders evidencing resale or onward supply
4.2 Evidence of Designated Zone importation
- Import declarations and customs clearance documents
- Bills of lading, airway bills, or equivalent transport documents
5. The Agreed-Upon Procedures in Practice
Article 3 sets out the specific procedures auditors must perform, each built around sample testing rather than a full population review:
- Inspection of customer trade licenses to confirm business activities consistent with reselling
- Verification of signed customer declarations (dated, and relevant to the Tax Period)
- Review of sales agreements and invoices for resale indicators (bulk quantities, resale pricing terms)
- Inspection of import documentation confirming Designated Zone entry
- Confirmation of Designated Zone status directly from the relevant Free Zone Authority
- Inspection of internal records — inventory logs, warehousing reports, goods movement records
6. Sample Size: A Defined Statistical Formula
Rather than leaving sample sizing to auditor judgement, the Decision prescribes a fixed formula, using a standardized 10% margin of error:
7. Filing Deadline and Consequence of Non-Compliance
- Deadline: The AUP report must be submitted to the FTA no later than 30 days after the deadline for filing the Corporate Tax return for the relevant Tax Period (or any other date the FTA specifies).
- Consequence of non-submission: If the report is not filed, the conditions under Clause 3, Article 2 of Ministerial Decision No. 84 of 2025 and paragraph (l), Clause 1, Article 2 of Ministerial Decision No. 229 of 2025 will be treated as not met — meaning the entity risks losing Qualifying Free Zone Person status for that Qualifying Activity, and with it, the 0% Corporate Tax treatment on the related Qualifying Income.
8. Effective Date and Transition
The Decision applies to Tax Periods commencing on or after 1 January 2026, notwithstanding its issuance on 2 June 2026. Free Zone with a January 2026 Tax Period start date are therefore already within scope and should treat this as a live, current-year compliance matter — not a future planning item.
9. Practical Next Steps for Free Zone Distributors
- Confirm whether your Qualifying Activity classification relies on paragraph (l) distribution in/from a Designated Zone
- Engage your statutory auditor (or another licensed auditor) early to scope the ISRS 4400 engagement and agree the sample population methodology
- Build a real-time documentation trail during the year — customer declarations, licenses, and import records collected retrospectively at year-end are harder to substantiate
- Map your Tax Period filing deadline back to the 30-day AUP submission window so the engagement is scheduled with sufficient lead time
- Coordinate with the relevant Free Zone Authority where written confirmation of Designated Zone status may be needed
9. Practical Next Steps for Free Zone Distributors
- Confirm whether your Qualifying Activity classification relies on paragraph (l) distribution in/from a Designated Zone
- Engage your statutory auditor (or another licensed auditor) early to scope the ISRS 4400 engagement and agree the sample population methodology
- Build a real-time documentation trail during the year — customer declarations, licenses, and import records collected retrospectively at year-end are harder to substantiate
- Map your Tax Period filing deadline back to the 30-day AUP submission window so the engagement is scheduled with sufficient lead time
- Coordinate with the relevant Free Zone Authority where written confirmation of Designated Zone status may be needed
Not Sure If This Decision Applies to You?
Speak with our expert team about your Qualifying Free Zone Person status, Qualifying Activity classification, and AUP readiness — before your next filing deadline.
How can we help you?
Get in touch with Hussain Al Shemsi Chartered Accountants for expert auditing, accounting, tax, and advisory services in the UAE.
- +971 50 3636231
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