If your free zone company buys goods, brings them into a Designated Zone and sells them on to other businesses, you now have a second filing obligation on top of the corporate tax return. It is an audit report, it has its own deadline, and the evidence it depends on has to be collected while the year is running.
TL;DR: FTA Decision No. 6 of 2026 requires Qualifying Free Zone Persons carrying out distribution in or from a Designated Zone to obtain an Agreed-Upon Procedures report from an independent UAE-licensed auditor. It applies to tax periods starting on or after 1 January 2026, and is due within 30 days of the corporate tax return deadline. Miss it and the distribution activity fails, putting the 0% rate at risk.
What Exactly Did the FTA Change?
The Federal Tax Authority issued Decision No. 6 of 2026 on 2 June 2026. It adds a compliance step for one specific group: Qualifying Free Zone Persons (QFZPs) whose qualifying activity is the distribution of goods or materials in or from a Designated Zone. Those businesses must now obtain an Agreed-Upon Procedures (AUP) report from an independent external auditor licensed in the UAE.
The report is prepared under International Standard on Related Services 4400, which produces factual findings rather than an opinion. The auditor carries out the procedures the FTA has specified and reports what they found. Responsibility for meeting the conditions stays with you.
Nothing else about the free zone regime moved. The 0% rate on qualifying income and the 9% rate on taxable income above AED 375,000 (Federal Tax Authority, 2026) both stand, and the qualifying activity list under Ministerial Decision No. 229 of 2025 is unchanged. What changed is the evidence you have to produce.
Who Does This Actually Apply To?
Only QFZPs relying on Designated Zone distribution as a qualifying activity. If your free zone income comes from services, holding shares, manufacturing or fund management, Decision 6 does not touch you.
Two tests define the population. First, you supply goods or materials to customers who resell them, or who process or alter them for the purpose of sale or resale. Selling to an end user does not count. Second, goods you import must have entered the UAE through a Designated Zone. Around 27 free zones currently hold designated status under Cabinet Decision No. 59 of 2017 (Federal Tax Authority, 2026), and the list is amended periodically, so confirm your zone's status.
Trading companies, wholesalers, importers and some logistics operators are the ones most likely to be caught. What we see most often is a business that has always described itself as "trading from a free zone" without ever testing whether its customers meet the reseller condition on paper.
When Is the AUP Report Due?
The report is due no later than 30 days after the deadline for filing your corporate tax return, not 30 days after you actually file it. Filing early does not shorten the window, and it does not extend it either.
Decision 6 applies to tax periods commencing on or after 1 January 2026. For a company with a 31 December year end, that means the first affected tax period is the one running right now, the return for it falls due 30 September 2027, and the AUP report is due by 30 October 2027.
A caution on the drafting. Some UAE advisers read the deadline as 30 days from actual submission. Both readings land on the same date if you file on the last day, but they diverge if you file early, so plan to the earlier of the two.
Why the 2026 Deadline Matters Now
The first report is more than a year away, and that is the trap. The auditor is testing transactions and documents from the current year, so the evidence has to exist before the year closes.
Two things have to be demonstrable. That your customers were resellers or processors at the time of supply, evidenced by trade licences, signed customer declarations, sales agreements and invoices. And that imported goods entered through a Designated Zone, evidenced by customs declarations, import permits, bills of lading and warehouse records.
You cannot reconstruct a customer declaration in October 2027 for a shipment that left in March 2026. In our experience, the trade licence check is the piece that quietly breaks: a customer's licence gets renewed mid-year with different activities on it, and nobody captures the version that was current on the invoice date.
How the Auditor Picks What to Test
Not every transaction. The FTA prescribes a statistical sample built on a 10% margin of error, and the sample must be weighted towards the highest-value customers, agreements and import transactions rather than picked at random (Deloitte Middle East, 2026).
That weighting matters for how you prioritise. Your largest accounts are close to certain to be tested, so those files need to be complete first. Small, one-off sales carry a much lower chance of selection.
One gap in a top-ten customer file therefore costs you more than several gaps spread across small accounts.
What Happens If You Do Not Submit It?
If the report is not provided, the conditions for the distribution activity are treated as not met. That is what makes this serious.
Under Article 18 of the Corporate Tax Law, a QFZP that fails a condition at any point in a tax period ceases to be a QFZP from the start of that period and for the following four tax periods (FTA Free Zone Persons Guide, 2024). A missing report is not a fixed fine. It is a five-year exit from the 0% regime, with income taxed at 9% above the AED 375,000 threshold throughout.
There is a related exposure. Distribution income that stops being qualifying becomes non-qualifying revenue, which is measured against the de minimis limit of 5% of total revenue or AED 5,000,000, whichever is lower (Ministry of Finance, 2025). For a distributor, that limit is breached almost immediately.
What Should You Do Before Year End?
Start with scoping. Confirm in writing whether Designated Zone distribution is genuinely one of your qualifying activities, because plenty of free zone companies assume it is when their income is actually service income.
Then run a file review on your top customers by value. For each, you want a current trade licence showing resale or processing activity, a signed reseller declaration, and a sales agreement or invoice terms consistent with onward supply. Where imports are involved, match each one to a customs declaration showing Designated Zone entry.
Appoint the auditor early. A UAE-licensed auditor running an ISRS 4400 engagement will want your documentation before the year closes, and a gap found in November is fixable in a way the same gap in September 2027 is not. One question clients always ask is whether their statutory auditor can do it, and generally yes, provided independence holds for both engagements.
Frequently Asked Questions
Does the AUP report apply to my corporate tax return due on 30 September 2026?
No. Decision 6 applies to tax periods commencing on or after 1 January 2026. A 31 December year end means the return due on 30 September 2026 covers the 2025 period and needs no AUP report. Your first report covers 2026 and is due by 30 October 2027.
Who can prepare the report?
An independent external auditor licensed in the UAE. That can be your existing statutory auditor or a separate firm, as long as independence is maintained. The engagement follows ISRS 4400, which delivers factual findings rather than an audit opinion, so it is a different piece of work from your free zone audited accounts.
What if my customers are end users rather than resellers?
Then those sales are not qualifying distribution income and should not be treated as such. They count towards non-qualifying revenue and are tested against the de minimis limit. Getting this classification right matters more than the report itself, and our guide to what counts as qualifying income works through the categories.
Does this replace any existing free zone obligation?
No. It sits on top of audited financial statements, adequate substance in the free zone, transfer pricing documentation and the corporate tax return itself. The other conditions for keeping the 0% rate all still apply.
How long do we need to keep the supporting documents?
Corporate tax records must be kept for seven years after the tax period ends, and the FTA can look back over that window. The declarations and customs documents feeding the AUP report fall under the same record retention rules.
If you distribute goods from a UAE Designated Zone, it is worth checking now whether your customer files would survive a value-weighted sample. Get in touch and we will review your reseller evidence and import documentation against what Decision 6 asks for, while there is still time to close the gaps in this tax period.