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NEW FTA REQUIREMENT · Tax periods from 1 January 2026

QFZP Distribution Activity: Mandatory Agreed-Upon Procedures (AUP) Report under FTA Decision No. 6 of 2026

Free zone distributors claiming the 0% Corporate Tax rate now need an independent auditor’s AUP report proving their customers are resellers and their imports came through a Designated Zone. No report means the distribution activity does not qualify.

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What Has Changed?

On 2 June 2026 the Federal Tax Authority issued FTA Decision No. 6 of 2026, setting additional compliance requirements for Qualifying Free Zone Persons (QFZPs) that carry out the qualifying activity of distributing goods or materials in or from a Designated Zone. It applies to tax periods starting on or after 1 January 2026. For a calendar-year company, the first period affected is 1 January – 31 December 2026.

Until now, distributors could rely on their own records to show they met the distribution conditions. From 2026, those conditions must be confirmed by an independent external auditor through an Agreed-Upon Procedures engagement.

Who Is Affected?

  • Free zone companies and branches that are, or want to be, a Qualifying Free Zone Person
  • Whose qualifying income includes distribution of goods or materials in or from a Designated Zone (typically trading and logistics companies; check that your free zone is listed as a Designated Zone under Cabinet Decision No. 59 of 2017 and its amendments)
  • Other qualifying activities (such as headquarters, treasury or logistics services) are not covered by this Decision

What the AUP Report Must Confirm

1. Customers are resellers

Goods are sold to customers who resell them, or process or alter them for sale. The auditor will:

  • inspect customers’ trade or commercial licences
  • verify signed customer declarations that goods were bought for resale (or donation to a public benefit entity)
  • review sales agreements, invoices and purchase orders

2. Imports came through a Designated Zone

Any goods imported into the UAE entered through a Designated Zone. The auditor will:

  • inspect import declarations and customs clearance documents
  • check bills of lading or airway bills
  • confirm the Designated Zone status of the entry point
  • review inventory, warehousing and goods-movement records

Auditor, Standard and Sampling

  • Who: your statutory auditor or another independent auditor licensed in the UAE
  • Standard: ISRS 4400 (Revised), Agreed-Upon Procedures Engagements, issued by the IAASB
  • Sample size: Population ÷ [1 + (Population × 10%²)], with a fixed 10% margin of error. The population is the number of customers, sales agreements or imports being tested. The sample must include the transactions with the highest distribution values in the period.

Example: 500 customers → 500 ÷ (1 + 500 × 0.01) = 500 ÷ 6 ≈ 84 customers to be tested, including your largest accounts.

Deadline

The AUP report must be submitted to the FTA within 30 days after the Corporate Tax return due date for the relevant tax period, or another date the FTA specifies. For a 31 December 2026 year-end, the return is due by 30 September 2027, so the AUP report is due by about 30 October 2027.

What You Should Do Now

  1. Collect customer evidence from day one of 2026: current trade licences and signed reseller declarations for every customer, kept on file and renewed when licences expire.
  2. Fix your import trail: make sure every import declaration, customs clearance and bill of lading shows entry through a Designated Zone, and confirm the zone’s status with your free zone authority.
  3. Align ERP and inventory records so each sale and import can be traced to its supporting documents (we set this up in Odoo and Zoho).
  4. Engage your auditor early and run a dry-run sample before year-end.
  5. Groups in scope of Pillar Two should weigh the QFZP benefit and compliance cost against any top-up tax under the UAE Domestic Minimum Top-up Tax (DMTT).

How PTG Consultant Helps

  • QFZP eligibility and distribution-activity review
  • Customer declaration templates and licence-tracking process
  • Designated Zone import documentation gap analysis
  • Pre-AUP mock testing using the FTA sampling formula
  • Coordination with your statutory auditor and Corporate Tax return filing

Frequently Asked Questions

Does this apply to my 2025 tax period?

No. FTA Decision No. 6 of 2026 applies to tax periods starting on or after 1 January 2026. Existing QFZP conditions continue to apply to earlier periods.

Can my statutory auditor issue the AUP report?

Yes. The report can be issued by the auditor of your financial statements or by any other independent auditor licensed in the UAE.

What happens if we sell some goods to end consumers?

Sales to customers who do not resell, process or alter the goods do not meet the distribution condition. That income should be reviewed for possible treatment as non-qualifying revenue and against the de minimis limits.

Are you a free zone distributor? Do not risk your 0% rate.

Get an AUP readiness review from an FTA-registered tax agent.

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This page summarises FTA Decision No. 6 of 2026 for general information only and is not tax advice. Always check the Decision and current FTA guidance for your specific facts.