The Decision was issued on 2 June 2026 and applies to tax periods beginning on or after 1 January 2026. For a company with a calendar financial year, that means the 2026 financial year is already in scope, and the evidence the auditor will test is being created right now. This guide explains who is affected, what the report must confirm, how the sampling works, and what to do before year end.

Key Takeaways Applies only to QFZPs carrying out the qualifying activity of distribution of goods or materials in or from a Designated Zone. Effective for tax periods beginning on or after 1 January 2026. An independent UAE-licensed auditor must issue an AUP report under ISRS 4400. The report must be submitted within 30 days after the Corporate Tax return deadline for the period. No report means the distribution activity does not meet the qualifying conditions, putting the 0% rate at risk.

 

Background: Distribution as a Qualifying Activity

Under the UAE Corporate Tax framework, a QFZP pays 0% on qualifying income and 9% on taxable income that is not qualifying. Ministerial Decision No. 265 of 2023 lists the qualifying activities. One of them is the distribution of goods or materials in or from a Designated Zone to a customer that resells those goods (or parts of them), or processes or alters them for sale or resale.

Two practical conditions sit behind this activity. First, the customer must be a reseller rather than an end user. Second, where the QFZP imports the goods into the UAE, they must enter through a Designated Zone. Until now, businesses held this evidence for their own files. Decision No. 6 requires an independent auditor to test it and report the results to the FTA.

Who Must Obtain the AUP Report?

The requirement is narrow but significant. It applies only to QFZPs that treat income as qualifying because it arises from distribution in or from a Designated Zone. It does not apply to other qualifying activities, such as logistics services, headquarter services or treasury activities. It also does not apply to free zone companies that have elected to be taxed under the standard 9% regime.

Businesses most likely to be affected include free zone wholesalers, importers and re-exporters, commodity and consumer goods distributors, and trading companies that hold and ship stock from customs-controlled Designated Zones. If your free zone tax position depends on distribution income, you should assume the Decision applies until you have confirmed otherwise.

What the AUP Report Must Confirm

The AUP report is prepared under the International Standard on Related Services (ISRS) 4400, issued by the International Auditing and Assurance Standards Board. It reports factual findings against two specific conditions:

1. Reseller status: the QFZP supplies goods or materials to customers that resell them, including after processing or alteration.
2. Designated Zone importation: goods entering the UAE, where imported by the QFZP, were imported through a Designated Zone.

The report can be issued by the company's statutory auditor or by any other independent auditor licensed in the UAE.

Documentation You Need to Keep

The Decision sets out the type of evidence the auditor will inspect. Building this file during the year is far easier than reconstructing it after year end.

Condition	Examples of Acceptable Evidence
Customer is a reseller	Valid trade or commercial licences showing resale activity; signed customer declarations confirming goods were bought for sale, resale or donation to a public benefit entity; sales agreements, invoices, purchase orders and other records showing onward supply.
Import through a Designated Zone	Import declarations and customs clearance documents showing entry through a Designated Zone; bills of lading, airway bills or equivalent shipping documents.
Supporting internal records	Inventory logs, warehousing reports and goods movement records that link imports to onward sales.

 

How the Prescribed Sampling Works

Unlike a typical AUP engagement where sample sizes are agreed with the client, Decision No. 6 prescribes the formula. The auditor must use:

Sample size = Population ÷ [1 + (Population × Margin of error²)], with the margin of error fixed at 10%.

The population is the total number of customers, sales agreements or imports being tested. The sample must include the items with the highest distribution transaction values in the tax period.

Population tested	Calculation	Minimum sample
100 customers	100 ÷ (1 + 100 × 0.01)	50
400 customers	400 ÷ (1 + 400 × 0.01)	80
1,200 import shipments	1,200 ÷ (1 + 1,200 × 0.01)	93 (rounded up)

Illustrative calculations prepared by Al Nuaimi Auditors using the formula in FTA Decision No. 6 of 2026.

The practical point is that sample sizes stay high even for mid-sized businesses. Missing licences or declarations for a handful of large customers can quickly become an exception in the report.

Submission Deadline and Consequences of Non-Compliance

The AUP report must be submitted to the FTA no later than 30 days after the deadline for filing the Corporate Tax return for the relevant tax period. Corporate Tax returns are due nine months after the end of the tax period.

Example: for a QFZP with a financial year ending 31 December 2026, the Corporate Tax return is due by 30 September 2027. The AUP report must therefore be submitted by 30 October 2027.

If the report is not submitted, the QFZP will not meet the conditions for the distribution qualifying activity. That income may then be treated as non-qualifying and can push the business over the de minimis limit (the lower of 5% of total revenue or AED 5 million). Under the Corporate Tax Law, a business that fails to meet a QFZP condition ceases to be a QFZP from the start of that tax period and for the following four tax periods. The real cost of a missing report can therefore be five years of 9% tax, not one.

Practical Steps to Take Before 31 December 2026

1. Confirm scope. Identify which income streams you classify as qualifying distribution income.
2. Map your customers. Classify customers as resellers or end users and collect current trade licences for each.
3. Obtain reseller declarations. Build a signed declaration into customer onboarding and annual renewals, and add resale wording to sales contracts.
4. Confirm Designated Zone status. Check with your free zone authority that the zone and warehouse used for imports are listed Designated Zones.
5. Organise customs files. Link each import declaration and bill of lading to inventory and sales records.
6. Prioritise top customers. The prescribed sample must include the highest-value transactions, so start with your largest accounts.
7. Engage your auditor early. Agree the procedures, timetable and a dry run on 2026 data well before the reporting deadline.

How Al Nuaimi Auditors Can Help

As a UAE-registered audit firm with experience serving free zone clients, we can perform the Decision No. 6 AUP engagement under ISRS 4400. We can also run a pre-assessment to identify documentation gaps while there is still time to fix them. Our audit and assurance team works across major free zones, including JAFZA, DMCC and RAK free zones. Our UAE Corporate Tax specialists can review whether QFZP status remains the right choice for your business.

Frequently Asked Questions

What is FTA Decision No. 6 of 2026?

It is a decision of the UAE Federal Tax Authority issued on 2 June 2026. It requires Qualifying Free Zone Persons carrying out distribution in or from a Designated Zone to obtain an agreed-upon procedures report from an independent auditor and submit it to the FTA.

When does the AUP report requirement start?

It applies to tax periods beginning on or after 1 January 2026. For calendar-year companies, the first report covers the year ending 31 December 2026.

What is the deadline for submitting the AUP report?

The report must be submitted within 30 days after the Corporate Tax return filing deadline for the relevant tax period. For a 31 December 2026 year end, that is 30 October 2027.

Can my existing statutory auditor issue the AUP report?

Yes. The report can be issued by the auditor responsible for your annual financial statement audit or by any other independent auditor licensed in the UAE.

What happens if a free zone distributor does not submit the report?

The distribution activity will not meet the qualifying conditions. This can cause the loss of QFZP status for the current and following four tax periods, with income taxed at 9%.

 

Need an AUP Report Under FTA Decision No. 6? Speak to our team about a documentation pre-assessment or the ISRS 4400 agreed-upon procedures engagement for your free zone business. Ahmed Saleh Al Nuaimi Auditors and Accountants Office No. 215, Abdulla Ahmad Mohammed Bin Fahad 4, Al Qusais 2, Dubai, UAE Tel: +971 4 323 1183  |  Mobile: +971 55 899 5971 Email: mail@alnuaimiauditors.com Website: alnuaimiauditors.com/contact

Official Sources

• FTA Decision No. 6 of 2026 (tax.gov.ae)
• Ministerial Decision No. 265 of 2023 on Qualifying Activities and Excluded Activities
• Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses