FTA Decision No. 6 of 2026 raises the compliance bar for distribution businesses in Designated Zones.
The UAE’s Free Zone Corporate Tax regime has always depended on meeting specific qualifying conditions. For certain distribution businesses, those conditions are now becoming much more evidentiary.
FTA Decision No. 6 of 2026, issued on 2 June 2026 and published on 14 July 2026, introduces a new requirement for Qualifying Free Zone Persons (QFZPs) engaged in the distribution of goods or materials in or from a Designated Zone to obtain an Agreed-Upon Procedures (AUP) Report from an independent external auditor. The Decision applies to Tax Periods beginning on or after 1 January 2026.
At first glance, this may look like another reporting requirement. It is more significant than that. The FTA is effectively asking qualifying distributors to demonstrate, transaction by transaction and with independent verification, that the commercial facts supporting the 0% regime actually exist. That is a meaningful shift in how compliance should be approached.
What FTA Decision No. 6 of 2026 Requires
The Decision builds on two earlier pieces of legislation. Ministerial Decision No. 84 of 2025 requires every QFZP to prepare and maintain audited financial statements, and separately empowers the FTA to prescribe additional procedures for Designated Zone distributors. Ministerial Decision No. 229 of 2025 sets out the underlying conditions for the Designated Zone distribution qualifying activity itself.
FTA Decision No. 6 of 2026 does not change those underlying conditions. It adds a new evidentiary layer on top of them, requiring affected QFZPs to obtain an AUP Report every year from either their statutory auditor or another independent auditor licensed in the UAE.
It is worth being precise about what an AUP report is not. It is not a full audit opinion, and the auditor does not provide an assurance conclusion. Instead, the auditor performs specific, prescribed procedures and reports factual findings. Responsibility for actually meeting the Corporate Tax conditions remains with the business – the auditor is reporting what the evidence shows, not certifying that the business qualifies.
What the AUP Report Must Establish
The report must be prepared under ISRS 4400 (Agreed-Upon Procedures Engagements), issued by the IAASB, together with applicable UAE auditing requirements. The auditor must perform agreed procedures and report factual findings demonstrating that:
- customers acquire the goods or materials for resale, or process or alter them for sale or resale; and
- where goods or materials are imported into the UAE by the QFZP, they enter through a Designated Zone.
The Decision also prescribes the documentary evidence expected to support those conclusions. For customer status, this can include:
- Business or trade licences
- Signed customer declarations
- Sales agreements
- Invoices and purchase orders
For importation, it can include:
- Customs declarations
- Import permits
- Bills of lading or air waybills
- Internal inventory and warehouse records
This is important because it turns what may previously have been a tax-team conclusion into a cross-functional evidence exercise.
The Compliance Burden Now Extends Beyond Tax
For an affected distributor, the required evidence may sit across several functions:
If those functions are not aligned, the issue may only emerge once the AUP work begins. That is too late.
A QFZP may commercially know that its customers are resellers. But if it cannot produce sufficient licences, declarations, or transaction records for the prescribed samples, the conclusion may not be supportable. Similarly, a business may physically move goods through a Designated Zone but still face difficulty if its customs, shipping, and internal movement records do not clearly demonstrate the required route.
NRD View
The risk is no longer only whether a transaction qualifies. It is whether the qualification can be evidenced consistently and independently.
Sampling Is Not Left Entirely to Judgement
The Decision goes further than simply requiring an auditor’s review. It prescribes a sampling formula built around a 10% margin of error:
Sample Size = Sample Population ÷ [1 + (Sample Population × (10%)²)]
The sample population depends on the procedure – the total number of customers for the customer-licence and declaration tests, the total number of sales agreements for the contract test, or the total number of relevant imports for the import tests. Crucially, the sample must include the customers, agreements, or imports with the highest transaction values in the relevant Tax Period – this is not a random selection.
The auditor must document the procedures performed, evidence obtained, and factual findings, with sample details included in an appendix.
That has an important practical consequence: large-value transactions are likely to attract direct scrutiny. For management, this means the highest-value customer relationships and import flows should be among the first records tested internally, well before the auditor’s sample is drawn.
The Filing Deadline Deserves Attention
The AUP Report must be submitted to the FTA within 30 days after the deadline for filing the Corporate Tax return for the relevant Tax Period, unless the FTA specifies another date. That deadline is tied to the legal filing deadline for the Corporate Tax return, not to the date on which an early return happens to be submitted, so filing ahead of schedule does not bring the AUP deadline forward.
Failure to submit the required report means the relevant qualifying conditions under the underlying Free Zone regime are not considered to be met. That is why this should not be viewed as a year-end audit add-on.
The potential consequence of failing the QFZP conditions is significant: under the Corporate Tax framework, a person that ceases to satisfy the qualifying conditions can lose QFZP status for the relevant Tax Period and the following four Tax Periods.
What Affected Businesses Should Do Now
The right response is not simply to appoint an auditor. Affected QFZPs should consider whether they can already evidence:
- Which customers are formally documented as resellers or processors, with licences and signed declarations on file – not just known informally to the sales team.
- Whether sales agreements, invoices, and purchase orders are consistently retained and linked to the correct customer and Tax Period.
- Whether customs declarations, import permits, and shipping documents clearly show goods entering through a Designated Zone.
- Whether warehouse and inventory records support the movement described in the customs and shipping documentation.
- Which customers and transactions carry the highest values, since these are the ones most likely to be sampled.
- Who within the business – tax, finance, logistics, or an external adviser – owns pulling this evidence together before the auditor’s engagement begins?
The Bigger Message
FTA Decision No. 6 of 2026 is part of a wider maturation of the UAE Corporate Tax environment. The direction is increasingly clear: tax positions need evidence, evidence needs controls, and controls need to operate before the return is filed.
For distribution businesses relying on the Free Zone 0% regime, the key question is therefore no longer “Do we believe we qualify?” It is “Can an independent auditor reproduce the evidence and reach the same factual conclusion?” That is a much higher compliance standard.
At NR Doshi & Partners, we believe affected businesses should treat the new AUP requirement as a readiness exercise across tax, customs, logistics, and documentation – not merely as another audit deliverable.
Frequently Asked Questions
What is FTA Decision No. 6 of 2026?
It is a Federal Tax Authority decision that requires Qualifying Free Zone Persons engaged in distributing goods or materials in or from a Designated Zone to obtain an Agreed-Upon Procedures (AUP) report from an independent auditor, confirming the evidence behind their qualifying activity.
Who does this Decision apply to?
It applies specifically to QFZPs carrying out the qualifying activity of distributing goods or materials in or from a Designated Zone. It does not automatically apply to every Free Zone company or every qualifying activity.
What is an AUP report, and how is it different from a financial statement audit?
An AUP report is a factual-findings engagement performed under ISRS 4400. The auditor carries out specific, prescribed procedures and reports what was found, without expressing an audit opinion or assurance conclusion. It is a separate deliverable from the annual financial statement audit and is not automatically covered by it.
What evidence should businesses maintain?
Evidence supporting customer resale or processing status (licences, signed declarations, sales agreements, invoices, purchase orders) and evidence supporting importation through a Designated Zone (customs declarations, import permits, shipping documents, warehouse and inventory records).
How are transactions selected for testing?
Using a prescribed formula based on a 10% margin of error, applied to the relevant population of customers, agreements, or imports. The sample must include the highest-value transactions in the Tax Period, so it is not a random selection.
When must the AUP report be submitted?
Within 30 days after the deadline for filing the Corporate Tax return for the relevant Tax Period, unless the FTA specifies another date. Filing the tax return early does not move this deadline forward.
What happens if the AUP report is not submitted?
The relevant qualifying conditions for the Free Zone distribution activity will not be considered met. A QFZP that fails to meet its qualifying conditions can lose QFZP status for the relevant Tax Period and the following four Tax Periods.
Conclusion
FTA Decision No. 6 of 2026 does not change who qualifies for the Free Zone 0% Corporate Tax regime. It changes how that qualification must be proven, and it puts that proof in the hands of an independent auditor working to an international standard.
Businesses that start building their evidence trail now – across sales, logistics, customs, and finance – will be in a far stronger position than those that wait for the AUP engagement to surface the gaps.
If your business distributes goods or materials in or from a UAE Designated Zone and you are not yet certain your customer and import records would withstand independent testing, NR Doshi & Partners‘ tax advisory team can help you assess your readiness ahead of the AUP deadline.
Author:
Written by the NR Doshi & Partners Tax Advisory Team. NR Doshi & Partners is an FTA-approved chartered accountancy and business advisory firm with seven offices across the UAE and a team of FTA-registered Tax Agents.
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