The Federal Tax Authority (FTA) has issued FTA Decision No. 6 of 2026, introducing additional compliance procedures for Qualifying Free Zone Persons (QFZPs) engaged in the distribution of goods or materials in or from a Designated Zone. Effective for Tax Periods starting on or after 1 January 2026, this Decision directly affects any Free Zone business relying on the 0% Corporate Tax rate for qualifying distribution income.
If your business trades, distributes, or warehouses goods through a UAE Designated Zone, this update is not optional reading. Failing to comply could mean losing your Qualifying Free Zone Person status and being taxed at the standard 9% Corporate Tax rate on income that would otherwise qualify.
At Tax Gian, we help UAE Free Zone businesses interpret and implement exactly this type of regulatory change. Below, we break down what FTA Decision No. 6 of 2026 means in practice, who it applies to, and what you need to do now.
What Is FTA Decision No. 6 of 2026?
FTA Decision No. 6 of 2026, issued on 2 June 2026, sets out additional procedures for QFZPs carrying out the Qualifying Activity of 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.
In simple terms, it introduces a mandatory Agreed-Upon Procedures (AUP) report that qualifying distributors must obtain from an independent external auditor each year, as a condition of continuing to benefit from the 0% Corporate Tax rate on qualifying income.
Who Does This Decision Apply To?
This is not a blanket rule for every Free Zone company. FTA Decision No. 6 of 2026 applies specifically to a Qualifying Free Zone Person that:
- Is engaged in the Qualifying Activity of distributing goods or materials in or from a Designated Zone
- Supplies goods or materials to customers who resell them, or process or alter them, for sale or resale
- Imports goods or materials into the UAE through a Designated Zone (where applicable)
If your Free Zone entity’s 0% Corporate Tax position depends on this particular Qualifying Activity, these new procedures apply in addition to, not instead of, your existing substance, audited financial statement, and de minimis requirements.
The New Agreed-Upon Procedures (AUP) Report Requirement
Under Article 2 of the Decision, an affected QFZP must obtain an AUP report from:
- The independent external auditor who is also responsible for the annual audit of the financial statements, or
- Any other independent auditor licensed in the UAE
The report must be prepared in accordance with International Standard on Related Services (ISRS) 4400, Agreed-Upon Procedures Engagements, as issued by the International Auditing and Assurance Standards Board (IAASB). This is a factual-findings engagement, not a full audit opinion, meaning the auditor reports on specific, prescribed procedures rather than expressing an overall opinion.
The AUP report must demonstrate two things:
- That the QFZP supplies goods or materials to customers who resell them, or process or alter them, for the purpose of sale or resale
- That goods or materials entering the UAE, if imported by the QFZP, are imported through a Designated Zone
What Documentation Do You Need to Collect?
Article 2, Clauses 4 and 5 of the Decision set out the supporting documentation that businesses should collect, maintain, and retain. This includes, but is not limited to:
To evidence customer reseller status:
- Valid trade, business, or commercial licences indicating reselling activity
- Signed customer declarations confirming goods are acquired for sale, resale, or donation to a public benefit entity
- Sales agreements, invoices, and purchase orders supporting resale or onward supply
To evidence importation through a Designated Zone:
- Import declarations and customs clearance documents
- Shipping documents such as bills of lading or airway bills clearly indicating entry through a Designated Zone
How the Sample Size Is Calculated
Article 3 of the Decision prescribes specific agreed-upon procedures, including:
- Inspection of customer trade licences
- Verification of customer declarations
- Review of sales agreements and transactional records
- Inspection of import documentation and Designated Zone confirmation
- Inspection of internal records such as inventory logs and warehousing reports
Auditors must apply a statistical sample size formula, using a fixed Margin of Error of 10%, with the sample drawn from the highest-value transactions in the relevant Tax Period. Details of samples selected must be included as an appendix to the AUP report.
Filing Deadline: Do Not Miss This
This is where many businesses risk falling short. Article 2, Clause 7 states that 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 another date.
Article 2, Clause 8 makes the consequence of missing this deadline explicit: if the QFZP fails to submit the AUP report on time, the conditions for the distribution of Qualifying Activity under Ministerial Decision No. 84 of 2025 and Ministerial Decision No. 229 of 2025 will not be considered met. In practice, this means the income concerned may lose its 0% qualifying status entirely.
Why This Matters for Your Corporate Tax Position
FTA Decision No. 6 of 2026 does not change the underlying Corporate Tax treatment of qualifying income. What it does is significantly raise the evidentiary bar for proving that a distribution activity genuinely qualifies. The FTA’s direction of travel is clear: documentation-driven, auditor-verified compliance, rather than self-declared eligibility.
For UAE Free Zone businesses in trading, wholesale distribution, logistics, or warehousing, this means:
- Engaging your auditor early to scope the ISRS 4400 engagement
- Building real-time documentation trails rather than reconstructing evidence at year-end
- Coordinating with your Free Zone Authority for written confirmation of Designated Zone status where required
- Mapping your Corporate Tax filing deadline against the 30-day AUP submission window, so there is no scramble at year-end
Frequently Asked Questions
Does FTA Decision No. 6 of 2026 apply to all Free Zone companies?
No. It applies specifically to Qualifying Free Zone Persons carrying out the Qualifying Activity of distributing goods or materials in or from a Designated Zone. It does not apply to other Qualifying Activities.
What happens if we do not submit the AUP report on time?
The conditions for the distribution Qualifying Activity will be treated as not met, which can result in the relevant income losing its 0% Corporate Tax qualifying status.
Who can prepare the AUP report?
Either the independent external auditor responsible for your annual financial statement audit, or any other independent auditor licensed in the UAE.
When is this Decision effective from?
It applies to Tax Periods commencing on or after 1 January 2026, and it came into effect on its date of issuance, 2 June 2026.
Is the AUP report the same as a financial statement audit?
No. It is a separate, factual-findings engagement performed under ISRS 4400, reporting on specific prescribed procedures rather than expressing an audit opinion.
How Tax Gian Can Help
Understanding whether your business is caught by FTA Decision No. 6 of 2026, and preparing the right documentation before your auditor begins the AUP engagement, is not something to leave until the last quarter of your Tax Period. Our team supports UAE Free Zone businesses with:
- Qualifying Free Zone Person status reviews and Qualifying Activity classification
- Corporate Tax compliance and filing support
- Coordination with auditors on Agreed-Upon Procedures engagements
- Documentation frameworks for customer reseller verification and Designated Zone importation evidence
Get in touch with Tax Gian today to assess how FTA Decision No. 6 of 2026 affects your Free Zone distribution business, and to put the right compliance framework in place before your next filing deadline.
