The Federal Tax Authority has introduced additional compliance requirements for certain Qualifying Free Zone Persons carrying out distribution activities.
FTA Decision No. 6 of 2026 applies to Qualifying Free Zone Persons distributing goods or materials in or from a Designated Zone. Affected businesses must obtain an independent Agreed-Upon Procedures report to support this qualifying activity.
The requirement applies to tax periods commencing on or after 1 January 2026. Other qualifying activities are not subject to this reporting requirement.
What is an Agreed-Upon Procedures report?
An Agreed-Upon Procedures, or AUP, report is prepared by an independent external auditor under International Standard on Related Services 4400.
The auditor performs procedures prescribed by the FTA and reports the factual findings. The report may be prepared by the business's statutory auditor or another independent UAE-licensed auditor.
It is separate from the annual financial statement audit and requires its own documentation and sampling.
What must the auditor examine?
The report must address two areas.
Customer reseller status
The auditor must examine whether customers:
- Resell goods or materials purchased from the Qualifying Free Zone Person
- Process or alter those goods or materials for sale or resale
This demonstrates genuine distribution activity rather than sales to end users.
Importation through a Designated Zone
Where goods or materials are imported into the UAE by the Qualifying Free Zone Person, the auditor must examine whether they entered through an officially recognised Designated Zone.
What evidence will businesses need?
Evidence supporting customer reseller status may include:
- Valid customer trade, business or commercial licences
- Signed and dated declarations confirming goods were purchased for sale or resale
- Sales agreements, invoices and purchase orders
- Records demonstrating onward sale, bulk quantities, resale terms or appropriate pricing
Customer declarations should relate to the relevant tax period. An old or general-purpose declaration may not be sufficient.
For imported goods, evidence may include:
- Customs declarations, clearance documents and import permits
- Bills of lading, airway bills or equivalent transport records
- Sales contracts
- Inventory, warehouse, goods-movement and logistics records
- Confirmation from the relevant Free Zone Authority that the entry point is a Designated Zone
The records should show how goods entered, were handled or stored within, and were distributed from the Designated Zone.
How will the auditor select samples?
The FTA has prescribed a sampling formula using a fixed 10% margin of error.
Depending on the procedure, the sample population may be based on the total customers, sales agreements or imports during the relevant tax period.
Samples must include those with the highest transaction values. Businesses should maintain complete documentation across the full population, particularly for their highest-value customers and imports.
When is the report due?
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.
The deadline is linked to the statutory filing deadline, not the date the business submits its return.
If the report is not submitted on time, the relevant qualifying conditions will be treated as not having been met. This could jeopardise the company's Qualifying Free Zone Person status and access to the 0% Corporate Tax rate.
What should affected businesses do now?
Businesses should not wait until their Corporate Tax return is being prepared to gather evidence. Priorities include:
- Confirming whether the requirement applies
- Engaging an independent UAE-licensed auditor early
- Identifying customer and import populations that may be sampled
- Obtaining current customer licences and reseller declarations
- Reviewing sales agreements and invoices for evidence of onward sale
- Organising customs, shipping, warehousing and goods-movement records
- Confirming Designated Zone status with the relevant Free Zone Authority
- Reviewing supply-chain and record-keeping processes for gaps
Preparing early is important because the report depends on evidence generated throughout the tax period. Missing customer declarations, customs documents or movement records may be difficult to reconstruct later.
How TLB can help
TLB can help affected businesses assess whether the requirements apply, review documentation, identify gaps and coordinate with the appointed independent auditor.
Think this may apply to your business?
Contact your TLB engagement partner to discuss your Free Zone distribution activities and readiness for the new reporting requirement.
