FTA mandates Agreed-Upon Procedures Report for Free Zone Distributors Engaged in Distribution in or from a Designated Zone

The UAE Federal Tax Authority (FTA) has issued Decision No. 6 of 2026 (2 June 2026), introducing a new compliance requirement for Qualifying Free Zone Persons (QFZPs) carrying on the Qualifying Activity of distribution of goods or materials in or from a Designated Zone. Affected QFZPs must now obtain an Agreed-Upon Procedures (AUP) report from an independent external auditor, prepared under ISRS 4400, and submit it to the FTA within 30 days of the Corporate Tax return filing deadline for each Tax Period commencing on or after 1 January 2026.

The AUP report must demonstrate, on a sample basis, that customers resell or process the distributed goods for resale, and that goods imported by the QFZP entered the UAE through a Designated Zone. Sample size is determined using an established formula with a 10% margin of error, with testing focused on the highest-value transactions.

Failure to submit such a report will mean the distribution activity conditions are deemed not met, which could result in loss of QFZP status and the ability to apply the 0% rate for five Tax Periods. Affected businesses should engage their auditors early and begin assembling the required documentation ahead of the deadline.

We discuss this Decision in more detail in an alert prepared by our team.