Free Zone Tax

FTA Decision No. 6 of 2026: New AUP Audit Requirement for Free Zone Distributors in the UAE

12 min read

Published: 25 July 2026

If your Free Zone company buys goods and resells them to other businesses through a Designated Zone, the Federal Tax Authority now wants independent proof of that every single year, not just your word for it on the tax return.

FTA Decision No. 6 of 2026 was issued on 2 June 2026 and applies to tax periods starting on or after 1 January 2026. It adds a brand-new compliance step for Qualifying Free Zone Persons (QFZPs) carrying out the qualifying activity of distribution of goods or materials in or from a Designated Zone: an independent Agreed-Upon Procedures (AUP) report from an external auditor, filed alongside the Corporate Tax return.

Miss it, and the FTA treats the distribution activity as not meeting its qualifying conditions at all, which means the related income loses its 0% rate and falls under the standard 9% Corporate Tax.

Who Actually Needs This

This Decision does not apply to every Free Zone business, and it does not apply to every QFZP. It applies specifically to QFZPs that:

Are registered in and operating from a Designated Zone (the customs-fenced free zones such as JAFZA, DAFZA, KIZAD, and similar listed zones), and
Carry out the qualifying activity of distribution: buying goods or materials and reselling or otherwise transferring them, where those goods physically move through or are held within the Designated Zone.

If your Free Zone company only earns qualifying income from manufacturing, holding company activities, logistics, fund management, or other qualifying activities under Ministerial Decision No. 265 of 2023, this specific AUP requirement does not apply to you. If you are still confirming whether your company counts as a QFZP at all, start with our free zone corporate tax registration guide, which covers the underlying QFZP conditions before this Decision layers an extra step on top.

What an AUP Report Actually Is

An Agreed-Upon Procedures engagement is not an audit opinion, and it is not the same as your annual financial statement audit. Under ISRS 4400 (the international standard the FTA has specified), the auditor does not give an opinion on whether your financial statements are “true and fair.” Instead, the auditor performs a fixed list of factual-checking procedures that you and the FTA have effectively agreed on in advance, and reports only the factual findings, no conclusions, no opinions.

For this Decision, the independent auditor is required to test things like:

Whether the customers who bought the distributed goods are genuinely reselling or further processing them (not just related parties dressed up as resellers).
Where applicable, whether the goods were actually imported through a Designated Zone, with supporting customs and shipping documentation.
Whether the arm’s length pricing and substance conditions tied to the distribution activity are being met in practice, not just on paper.

This is a separate, standalone deliverable. It does not replace your normal annual audit if your company already needs one, and it does not replace your Corporate Tax return. It sits alongside both.

Who Can Perform the AUP

The report must come from an “independent external auditor” licensed to practice in the UAE. This can be:

The same firm that already does your statutory financial statement audit, or
Any other independent, UAE-licensed auditor you choose to engage separately.

Either way, the auditor must be independent of your company; you cannot self-certify this internally, and an in-house accountant’s sign-off does not satisfy the requirement.

The Deadline: Tied to Your Return’s Legal Due Date, Not When You Actually File

This is the detail businesses are most likely to get wrong. Article 2(7) of the Decision ties the AUP filing deadline to 30 days after the legal deadline for filing your Corporate Tax return for that tax period, not 30 days after the date you actually submit the return.

That distinction matters in both directions:

If you file your Corporate Tax return early, the AUP deadline does not move earlier with it.
If you file your return late (for whatever reason), the AUP deadline does not move later either.

Both deadlines are calculated independently, from the legal due date fixed by the Corporate Tax Law, which is generally nine months after the end of your tax period.

Tax period	Corporate Tax return legal deadline	AUP report deadline
1 Jan 2026 – 31 Dec 2026	30 September 2027 (9 months after period end)	Around 30 October 2027 (30 days after the return’s legal deadline)

Treat these as two separate entries on your compliance calendar, both driven off the same fixed legal date, and neither one flexible because of when you personally chose to file.

What Happens If You Skip It

Article 2(8) of the Decision is direct about the consequence: if the required AUP report is not submitted, the additional condition under Ministerial Decision No. 84 of 2025 and the Designated Zone distribution condition under Ministerial Decision No. 229 of 2025 are both treated as not met.

In plain terms, that means:

The distribution activity no longer qualifies for the 0% Corporate Tax rate.
The related income becomes subject to the standard 9% Corporate Tax rate.
This is a real financial cost, not a paperwork penalty, on top of whatever administrative fine applies for the missed filing itself.

The rest of your QFZP status and other qualifying activities are not automatically affected, but the distribution income specifically loses its qualifying treatment for that tax period.

How This Fits With Existing QFZP Rules

This Decision does not change what counts as qualifying income under the existing QFZP framework. It adds an evidentiary layer on top of it. The underlying conditions, being a Free Zone Person, maintaining adequate substance, earning qualifying income from a qualifying activity, and meeting the de minimis requirement, are unchanged. What changes is that for this one activity (distribution through a Designated Zone), you now have to prove it independently every year instead of simply asserting it on your return.

If you have not yet reviewed which of your activities and income streams count as qualifying under the broader framework, our guide on the QFZP conditions inside the free zone corporate tax registration guide is the right starting point before layering this AUP obligation on top.

Practical Steps to Prepare Now

Confirm whether your company is actually in scope. Only distribution activity through a Designated Zone triggers this; other qualifying activities do not.
Engage your auditor early. ISRS 4400 procedures take planning time, and your existing financial statement auditor may need to scope this as a separate engagement.
Build a customer register. Collect trade licenses, reseller declarations, and confirmations from your distribution customers as standard practice going forward, not scrambled together at year-end.
Keep import documentation organized. Customs and shipping records proving goods moved through the Designated Zone are central to what the auditor will test.
Calendar both deadlines separately. Mark the Corporate Tax return’s legal due date and the AUP deadline (30 days later) as two distinct dates, regardless of when you plan to actually file.
Do not wait for your normal audit cycle. If your annual financial statement audit happens close to your return deadline, the AUP engagement needs its own timeline, not a fallback to whenever the main audit wraps up.

If your accounting records, fixed asset registers, and reconciliations are not already in year-end shape, our year-end closing checklist is a useful starting point before your auditor arrives for either engagement.

Common Mistakes to Avoid

Based on how similar new compliance requirements have played out in the UAE Corporate Tax system so far, these are the mistakes most likely to cost a Free Zone distributor its 0% rate:

Assuming the annual financial statement audit already covers this. It does not. The AUP engagement is scoped separately, under a different standard (ISRS 4400), with different procedures than a financial statement audit under ISA.
Treating “distribution” too broadly. Not every sale of goods counts. The Decision is specifically about the qualifying activity of distribution in or from a Designated Zone; a Free Zone company that mainly manufactures or provides services, with only incidental goods sales, may not be in scope at all. Confirm your classification rather than assuming either way.
Waiting until the Corporate Tax return deadline to think about the AUP. Since ISRS 4400 procedures require the auditor to test actual transactions, customer confirmations, and import documentation, starting this a few weeks before the deadline usually is not enough time to gather everything the auditor needs to test properly.
Losing track of which deadline is which. The Corporate Tax return deadline and the AUP deadline are two separate dates, roughly 30 days apart, both fixed to the legal due date. Missing either one independently carries its own consequence.
Assuming a related-party customer automatically fails the test. The AUP procedures look at whether the customer is genuinely reselling or processing the goods, not simply whether the customer happens to be related. Genuine related-party resale can still meet the condition if properly documented.

Documentation Checklist to Start Building Now

Whether or not your auditor has engaged yet, these are the records the AUP procedures are likely to test, so it is worth having them organized before the engagement starts:

Customer trade licenses and business activity confirmations for every distribution customer.
Written reseller or processing declarations from customers, confirming what they do with the goods after purchase.
Import and customs documentation showing goods physically moved through the Designated Zone.
A master register of customers and transactions, ideally sorted by value, so the auditor can sample efficiently instead of requesting your full ledger.
Evidence supporting arm’s length pricing on distribution transactions, particularly with related parties.

Frequently Asked Questions

Does this apply to every Free Zone company in the UAE?
No. It only applies to Qualifying Free Zone Persons carrying out the specific qualifying activity of distributing goods or materials in or from a Designated Zone. Manufacturing, holding, logistics, and other qualifying activities are not covered by this particular Decision.

What is a Designated Zone?
A Designated Zone is a specific list of customs-fenced Free Zones named in a Cabinet Decision for VAT purposes, treated as outside the UAE for certain tax rules. Not every Free Zone in the UAE is a Designated Zone; check your zone’s status against the official Cabinet Decision list rather than assuming.

Is the AUP report the same as my normal audit?
No. Your annual financial statement audit gives an opinion on your financial statements as a whole. An AUP engagement under ISRS 4400 involves a fixed set of factual-checking procedures on specific items (customer resale status, Designated Zone imports, pricing) and reports facts only, without an opinion.

Can my existing audit firm do the AUP report too?
Yes, as long as they remain independent, or you can engage a separate independent, UAE-licensed auditor specifically for this engagement.

When exactly is the AUP report due?
30 days after the legal deadline for filing your Corporate Tax return for that tax period, generally nine months after your tax period ends. This is fixed to the legal due date, not to whenever you actually submit your return.

What happens if I file my return early? Does the AUP deadline move up too?
No. Article 2(7) specifically ties the AUP deadline to the return’s legal due date, not the actual filing date. Filing early does not shorten your AUP deadline.

What if I file my AUP report late?
The conditions under Ministerial Decision No. 84 of 2025 and Ministerial Decision No. 229 of 2025 are treated as not met for that tax period, meaning the distribution income loses its 0% qualifying treatment and becomes subject to the standard 9% Corporate Tax rate, in addition to any applicable administrative penalty for the late filing itself.

Does missing the AUP report affect my whole QFZP status, or just the distribution income?
Based on the Decision’s wording, it affects the specific qualifying condition tied to the distribution activity for that tax period. Other qualifying activities and your broader QFZP registration are not automatically revoked, but always verify your specific situation with the FTA or a qualified advisor given the financial stakes.

Do I need to file this every year, or just once?
Every year, for every tax period in which your company carries out this qualifying distribution activity. It is an annual, recurring obligation, not a one-time filing.

Where can I get official confirmation of the exact requirements?
Verify the full text of FTA Decision No. 6 of 2026, and any related guidance the FTA publishes, directly through the Federal Tax Authority’s official channels (eservices.tax.gov.ae) before relying on any single summary, including this one.

What should I do if I am not sure whether my company qualifies as a distributor under this Decision?
Speak to your tax advisor or auditor before your next filing deadline. Given that the consequence is losing a 0% rate on real income, this is not a decision to guess on.

Planning to Visit the UAE First to Set Up or Expand Your Free Zone Business?

If you are considering entering the UAE to scope out or expand a Free Zone distribution business, GDRFA Dubai’s 5-year multiple-entry tourist visa lets you come and go without a local sponsor while you finalize your setup plans, before switching to a residence visa once your company is registered.

Need Help Preparing for the AUP Requirement?

If your Free Zone company distributes goods through a Designated Zone, this is not something to leave until your return deadline is close. Qaspro Global can help you confirm whether you are in scope, organize your customer and import records, and coordinate the AUP engagement with your auditor on time.

Message us on WhatsApp: +971 55 153 9679

Written by Muhammad Qasim FCCA
Founder & CEO, Qaspro Global — UAE tax expert with 16+ years of experience in VAT, corporate tax and FTA audit support.