On 2 June 2026, the UAE Federal Tax Authority (FTA) issued 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. The Decision is effective for Tax Periods starting on or after 1 January 2026, meaning most Free Zone distributors are already inside its scope for the current financial year.
For any Free Zone company relying on the 0% Corporate Tax rate for its distribution activity, this Decision is not optional reading — it sets out exactly what evidence must be collected, how it must be tested, and by when it must be handed to the FTA. Miss it, and the QFZP conditions underpinning your 0% rate on that income stream are treated as unmet.
Why This Decision Exists
Under the UAE Corporate Tax Law, the distribution of goods or materials in or from a Designated Zone can qualify as a Qualifying Activity — but only where the customer either resells the goods (or parts of them) or processes and alters them before onward sale, and only where any goods entering the UAE are imported through a Designated Zone. Historically, proving this to the FTA’s satisfaction has been the subject of some ambiguity. Decision No. 6 removes that ambiguity by prescribing a formal, auditor-led verification process.
The Core Requirement: An Agreed-Upon Procedures Report
Article 2 of the Decision requires every QFZP (Qualifying Free Zone Person) relying on the distribution Qualifying Activity to obtain an Agreed-Upon Procedures (AUP) report each Tax Period. The report must be prepared by an independent external auditor — either the same firm that conducts the annual financial statement audit, or any other UAE-licensed auditor — and must follow International Standard on Related Services (ISRS) 4400, the global standard for agreed-upon procedures engagements.
The AUP report has to establish two factual points, backed by evidence:
- That the QFZP’s customers genuinely resell the goods or materials supplied (or process/alter them before resale), and
- That any goods or materials the QFZP itself imports into the UAE entered through a Designated Zone.
What Evidence Auditors Will Be Testing
Article 3 sets out the specific procedures auditors must perform, split across two workstreams.
1. Verifying reseller status
- Inspecting a sample of customer trade or commercial licences to confirm activities such as trading, wholesaling, retailing or manufacturing.
- Obtaining signed customer declarations confirming the goods were acquired for resale (or donation to a public benefit entity).
- Reviewing sales agreements, invoices and purchase orders for evidence of bulk quantities, resale terms or pricing structures typical of onward supply.
2. Verifying Designated Zone importation
Reviewing internal logistics records — inventory logs, warehousing reports and goods-movement records — to confirm goods were handled or stored within a Designated Zone before distribution.
Inspecting customs declarations, import permits, sales contracts and bills of lading.
Confirming with the relevant Free Zone Authority that the port, zone or area used is formally recognised as a Designated Zone.
How the Sample Size Is Calculated
- Inspecting customs declarations, import permits, sales contracts and bills of lading.
- Confirming with the relevant Free Zone Authority that the port, zone or area used is formally recognised as a Designated Zone.
Reviewing internal logistics records — inventory logs, warehousing reports and goods-movement records — to confirm goods were handled or stored within a Designated Zone before distribution.
How the Sample Size Is Calculated
Rather than leaving sampling to auditor discretion, the Decision fixes the methodology. Article 3(3) sets out a statistical formula, with a fixed 10% Margin of Error, applied against the ‘Sample Population’ — the total number of customers, sales agreements or imports in the relevant Tax Period. In practice, the sample is not random: it must prioritise the customers, contracts or imports with the highest transaction values for that period. Businesses with a small number of high-value customers or shipments should expect a large proportion of their transactions to fall inside the tested sample.
Deadlines and the Cost of Missing Them
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, unless the FTA sets a different date. The consequence of a late or missing report is unambiguous under Article 2(8): the QFZP conditions for the distribution activity are simply treated as not met — putting the 0% rate on that income at risk, regardless of whether the underlying facts would otherwise have supported qualification.
Practical Next Steps for Free Zone Distributors
- Confirm whether your distribution activity relies on paragraph (l) of the Qualifying Activities list in Ministerial Decision No. 229 of 2025.
- Engage your auditor early — ISRS 4400 engagements need lead time, particularly to assemble customer licences, declarations and import documentation.
- Build a running file of customer trade licences, signed reseller declarations and high-value sales agreements throughout the year, rather than reconstructing it at year-end.
- Ask your Free Zone Authority for written confirmation of Designated Zone status if this hasn’t already been obtained.
- Diarise the 30-day post-filing deadline for AUP report submission alongside your Corporate Tax return deadline.
The Bottom Line
Decision No. 6 of 2026 turns what was previously a somewhat subjective qualifying test into a documented, auditor-verified process with a hard filing deadline. For Free Zone distributors, the message is straightforward: the evidence has to exist, it has to be tested against a prescribed sampling methodology, and it has to be filed on time. Businesses that start building their documentation trail now will find the annual AUP process far less disruptive than those that leave it until the filing deadline is already in sight.