FTA issues Decision No. 6 of 2026 on additional compliance requirements for QFZPs engaged in distribution activities

Overview

The United Arab Emirates (UAE) Federal Tax Authority (FTA) has issued FTA Decision No. 6 of 2026 (the Decision) setting out the additional compliance requirements applicable to Qualifying Free Zone Persons (QFZPs) undertaking the qualifying activity of distribution of goods or materials in or from a Designated Zone (DZ).

In continuation to Clause 3 of Article 2 of Ministerial Decision (MD) No. 84 of 2025, the Decision introduces mandatory audit-related procedures requiring affected QFZPs to obtain an Agreed-Upon Procedures (AUP) Report from an independent external auditor (statutory auditor or any independent auditor licensed in the UAE). The AUP report is intended to demonstrate compliance with the specified conditions applicable to distribution activities, i.e., (i) Verifying reseller status (of the customers); and (ii) Verifying DZ importation.

The Decision applies to tax periods commencing on or after 1 January 2026.

Key updates

1. Mandatory AUP Report
   QFZPs engaged in the qualifying activity of distribution of goods or materials in or from a DZ are required to obtain an AUP report from an independent external auditor. The report must be prepared in accordance with International Standard on Related Services (ISRS) 4400, AUP Engagements as issued by the International Auditing and Assurance Standards Board (IAASB), and applicable legislation governing auditing practices in the UAE.
2. Verifying reseller status (of the customers)
   The AUP report must demonstrate that customers acquiring goods or materials from the QFZP are purchasing such goods for resale, onward supply, or for processing/ alteration for the purpose of sale/ resale. To support this requirement, QFZP shall collect, maintain, and retain adequate documentation, including valid business, trade, or commercial licences, signed customer declarations / written confirmations, sales agreements, invoices, purchase orders, or other transactional records evidencing reseller activities.
3. Verifying DZ importation
   The AUP report must demonstrate that the goods or materials entering the UAE were imported through a DZ. To support this requirement, QFZP shall collect, maintain, and retain adequate documentation including import declarations, customs clearance documents, shipping documents such as a bill of lading/ an airway bill, or equivalent transport documents clearly indicating entry through a DZ. 
4. AUP and Other Guidance
   The decision provides detailed guidance on how the AUP shall be performed and documented. It details the processes for the relevant verifications such as:
   
   - Inspection of customer trade/business/commercial
     licences (or equivalent documents) to
     verify customer's activities.
   - Verification of signed customer declarations/
      confirmations/Importation documentations.
   - Review of Sales Agreements and Other Transactional
     Records
    - Confirmation of DZ status, etc. 
5. Sampling methodology standardised
   The FTA has prescribed a sampling methodology for the auditor's review. The sample size is to be determined using a formula (given below) based on the relevant population and a prescribed margin of error of 10%. The sample must also include transactions with the highest values during the relevant tax period. 
   Sample Size = Sample Population ÷ [1 + (Sample Population × 10%²)]
6. Submission deadline introduced
   The AUP report must be submitted to the FTA no later than 30 days after the deadline for filing the CT return for the relevant tax period, or such other date as determined by the FTA.
7. Failure to submit may affect QFZP eligibility
   The Decision clarifies that where a QFZP fails to submit the required AUP report, the relevant conditions applicable to the qualifying distribution business activity shall be considered as ‘not met’. Correspondingly, it would impact the taxpayer’s ability to benefit from the QFZP regime in relation to the distribution activity.

Conclusion

The Decision introduces a significant compliance framework for QFZPs undertaking distribution activities in or from DZs. While the qualifying activity rules remain unchanged, impacted taxpayers must now meet this condition of enhanced documentation, audit and reporting to claim the QFZP benefit.

Businesses should assess whether their record-keeping and operational processes adequately support these new requirements. The new requirements should be treated as an ongoing compliance framework, rather than merely an annual reporting exercise.

Although the AUP Report can be submitted within 30 days after the CT return filing due date, businesses should appoint the auditor early to identify and address any issues ahead of time.