FTA Decision No. 6 of 2026 introduces a mandatory audit-backed compliance layer for Qualifying Free Zone Persons relying on the distribution activity, and the clock is already running for FY2026 tax periods.
On 2 June 2026, the Federal Tax Authority issued Decision No. 6 of 2026, a development that Qualifying Free Zone Persons (QFZPs) engaged in the distribution of goods or materials should not overlook. The Decision is effective for tax periods starting on or after 1 January 2026, which means many businesses relying on this Qualifying Activity are already inside the compliance window without realizing it.
At AZ Advisory Services, we work with a wide portfolio of Free Zone clients across trading, logistics, and distribution sectors. Here is what this Decision means for your business, and why the time to act is now rather than at year end.
What the Decision actually requires
Distribution of goods or materials in or from a Designated Zone has long been recognized as a Qualifying Activity under Ministerial Decision No. 229 of 2025. What has changed is the evidentiary bar. Under the new Decision, a QFZP relying on this activity must now obtain an agreed-upon procedures (AUP) report from an independent external auditor, prepared in line with International Standard on Related Services 4400.
The AUP report is not a formality. It must factually demonstrate two things:
- That the QFZP’s customers genuinely resell the goods or materials, or process and alter them for resale, rather than simply receiving them as an end user would.
- That any goods or materials the QFZP imports into the UAE entered through a Designated Zone, supported by customs and shipping documentation.
If the report is not submitted, the Decision is explicit: the Qualifying Activity conditions will be treated as not met. That is a direct pathway from a missed filing to a lost tax benefit.
The documentation trail auditors will expect
The Decision sets out, in real detail, what your auditor will be sampling and testing. On the reseller side, this includes customer trade licences showing trading or wholesaling activity, signed customer declarations confirming resale intent, and sales agreements or invoices that reflect bulk quantities or resale pricing structures. On the import side, it includes customs declarations, import permits, bills of lading, and confirmation from the relevant Free Zone Authority that the entry point is a recognized Designated Zone.
Crucially, the Decision does not leave sample sizing to guesswork. It prescribes a formula, based on a 10 percent margin of error, applied to your total population of customers, sales agreements, or imports for the relevant tax period, with the highest value transactions selected first. In practice, this means your highest revenue customers and largest shipments will be the first files an auditor asks for.
Why the timeline matters more than it might appear
The AUP report is due to the FTA no later than 30 days after your Corporate Tax return filing deadline for the relevant tax period. For many businesses with a calendar year end, that returns filing deadline itself lands within a matter of months, and the underlying documentation, trade licences, signed declarations, customs paperwork, cannot be assembled retroactively in a weekend.
Businesses that have historically treated their reseller relationships informally, without signed declarations or clean transactional records, now have a narrow window to build that evidence base before their auditor needs it.
What we recommend doing now
For any client relying on the distribution Qualifying Activity, we suggest three immediate steps. First, confirm with your auditor, whether that is your existing statutory auditor or another licensed firm, that they are positioned to issue an ISRS 4400 agreed-upon procedures report on this specific scope. Second, begin collecting signed reseller declarations and confirming Designated Zone status for your largest customers and import transactions now, rather than waiting for the filing deadline to approach. Third, review your existing customer and import files for gaps, since the sample selected by the auditor will draw from your highest value transactions first, so any weaknesses there carry the most exposure.
This Decision is a clear signal from the FTA that qualifying income claims under the Free Zone regime will be tested with auditor-grade rigor going forward, not simply accepted at face value.
Talk to us
If your business relies on the distribution activity within a Designated Zone, our Corporate Tax and Transfer Pricing team at AZ Advisory can help you assess your exposure, prepare the underlying documentation, and coordinate with your auditor on scoping the agreed-upon procedures engagement well before the filing deadline arrives.
Reach out to our team to discuss how this Decision applies to your specific structure and transaction profile.
