31 August 2026 • 2 minute read
FTA Introduces New Compliance Requirements for Qualifying Free Zone Distributors
The Federal Tax Authority (FTA) has issued Decision No. 6 of 2026, introducing additional compliance requirements for Qualifying Free Zone Persons (QFZPs) engaged in the distribution of goods or materials in or from a Designated Zone. The new requirements apply to Tax Periods commencing on or after 1 January 2026.
Meeting the new requirements, as part of the ongoing compliance with the Free Zone Tax Regime's conditions, is crucial as failure to meet these would entail losing the 0% tax incentive for the relevant Tax Period, as well as for the four subsequent Tax Periods.
Under the Decision, eligible QFZPs must obtain an Agreed-Upon Procedures (AUP) Report from an independent external auditor (e.g., the auditor that performs the audit of the QFZP's annual Financial Statements), prepared in accordance with the International Standard on Related Services (ISRS) 4400 and applicable UAE auditing regulations.
The AUP report must demonstrate that:
- Customers acquire the goods or materials for resale, processing, or alteration; and
- Imported goods or materials entered the UAE through a Designated Zone.
The Decision also sets out the audit and sampling methodology to be applied by the auditor when verifying compliance with these conditions.
The AUP Report must be submitted to the FTA within 30 days following the Corporate Tax return filing deadline for the relevant Tax Period.
Failure to obtain and submit the required AUP Report within the prescribed timeframe may result in the relevant qualifying conditions being regarded as not having been met. This could jeopardize the taxpayer's eligibility for the Free Zone Tax Regime and the associated 0% Corporate Tax incentive.
Key takeaway
QFZPs engaged in distribution activities should act now by engaging an independent auditor and ensuring that the necessary customer and import documentation is available to support compliance with the new requirements.
