Federal Tax Authority Decision No. 6 of 2026 requires a Qualifying Free Zone Person that distributes goods in or from a Designated Zone to obtain an Agreed-Upon Procedures report from an independent auditor and file it with the authority within 30 days of the corporate tax return deadline. Without that report the 0% rate on the distribution activity falls away. It applies to tax periods beginning on or after 1 January 2026.
What happened
The Federal Tax Authority (FTA), the UAE body that administers corporate tax and VAT, issued Decision No. 6 of 2026 in July 2026. It adds a compliance requirement for a Qualifying Free Zone Person (QFZP) — a free zone entity that meets the statutory conditions to be taxed at 0% on its qualifying income — where that entity carries on the qualifying activity of distributing goods or materials in or from a Designated Zone. A Designated Zone is a free zone area formally listed by the authorities as a fenced customs area with its own controls on the entry and exit of goods. The entity must obtain an Agreed-Upon Procedures (AUP) report — an engagement in which an auditor performs a fixed set of factual checks agreed in advance and reports the findings, without expressing an audit opinion — prepared under the international standard ISRS 4400 by an auditor independently licensed in the UAE. The report must establish two matters: that the entity's customers are genuinely resellers, or businesses that process the goods for onward resale; and that imported goods entered the UAE through a Designated Zone. It must reach the FTA within 30 days of the filing deadline for the corporate tax return of the relevant period, and it applies to tax periods beginning on or after 1 January 2026.
What changes in practice
The condition itself is not new. What is new is who confirms it. Until now, a free zone entity assessed its own qualifying status and asserted it in the return; the FTA would test it only if it opened an enquiry. From tax periods beginning in 2026 the distribution activity carries a scheduled documentary obligation with a third-party signature on it. That converts a self-assessment into a dated deliverable, with an auditor's engagement to plan, a fee to budget and a body of evidence — customer trade licences, supply contracts, customs entries, transport documents — that has to exist before the engagement starts rather than after a query arrives. The practical bottleneck is availability: auditors qualified to perform ISRS 4400 engagements in the UAE are a finite pool, and the deadlines cluster around the same filing dates for every calendar-year taxpayer.
Who it applies to
Free zone companies and branches established in a Designated Zone that distribute goods or materials, including commodity trading operations, general import and export businesses and e-commerce operators holding physical stock in a free zone warehouse. It is relevant to any group that routes product flows through a UAE free zone entity and relies on the 0% rate for that margin. It does not affect free zone entities whose qualifying income comes from other qualifying activities, nor entities that have accepted the 9% rate. Groups with a mixture of activities should expect the report to cover only the distribution stream, while the wider QFZP conditions continue to apply across the entity.
The exposure
The consequence of not filing is not a fixed administrative fine. It is the loss of QFZP status in respect of that qualifying activity, so the related income is taxed at 9% rather than 0%. On a distribution business with a meaningful margin, that is a material and recurring cost. There is a second, less visible exposure: an AUP engagement tests the customer-reseller condition against actual documents, and some structures will discover at that point that a share of their sales goes to end users rather than resellers. That finding does not create the problem — it reveals one that already existed, potentially across earlier periods still within the FTA's assessment window. It is better to identify it in a controlled review than in an audit.
What to do now
Identify which entities in the group carry on distribution in or from a Designated Zone, and for each of them establish whether the goods actually entered the UAE through such a zone — the customs documentation, not the commercial assumption, settles this. Then test the customer base: for each material customer, confirm from its trade licence and its own trading pattern whether it resells or processes for resale. Where end users appear in the mix, quantify the share and take advice on whether the flow can be restructured before the first affected period closes. In parallel, approach your auditor now to book the AUP engagement, since capacity around the filing deadlines will be tight. For a calendar-year taxpayer the first affected period is the year ending 31 December 2026, with the report due within 30 days of the September 2027 return deadline — which leaves time to correct the underlying facts, but only if the review starts this year.
Sources
- https://tax.gov.ae/en/taxes/corporate.tax/corporate.tax.guides.references.aspx
- https://www.pwc.com/m1/en/services/tax/middle-east-tax-news-alerts/2026/uae-corporate-tax-qfzp-distribution-activities.html
Published 17 August 2026 on the basis of public sources and official United Arab Emirates instruments. This is not legal or tax advice. Verify your position with a qualified professional before acting.