The Decision introduces additional compliance procedures for a specific category of Qualifying Free Zone Persons: those carrying on the Qualifying Activity of distributing goods or materials in or from a Designated Zone for UAE Corporate Tax purposes.
Its central requirement is a separate agreed-upon procedures report prepared by an independent external auditor licensed in the UAE in accordance with International Standard on Related Services ISRS 4400, in addition to the annual audit of the financial statements.
The report does not merely review accounting figures. It performs and documents specific procedures to verify customer reseller status and, where the goods enter the UAE and are imported by the Qualifying Free Zone Person, importation through a Designated Zone.
The Decision applies to Tax Periods commencing on or after 1 January 2026. Affected businesses should therefore organise the required evidence from the beginning of the Tax Period rather than waiting until the report becomes due.
The entity must first qualify as a Qualifying Free Zone Person and continue to satisfy the other conditions under the Corporate Tax Law and the related decisions.
The Decision applies where the business relies on the Qualifying Activity involving the buying and selling of goods, materials, component parts or other tangible movable items.
Being located in a Free Zone is not enough. The relevant activity must be carried on in or from an area formally recognised as a Designated Zone under the applicable legal instruments.
A separate agreed-upon procedures report is now required in addition to the annual audited financial statements, even where the same auditor performs both engagements.
The Decision specifies the procedures to verify customer reseller status and to verify importation through a Designated Zone where the import condition applies.
A business description or invoice alone is not sufficient. Customer licences, declarations, agreements, invoices, purchase orders, customs documents and shipping records are required.
The Decision introduces a formula using a 10% margin of error and requires the sample to include the customers, agreements or imports with the highest transaction values.
The 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, unless the FTA specifies another date.
Failure to submit the report means the conditions connected with the distribution activity are not treated as satisfied, creating a serious risk to QFZP status.
An agreed-upon procedures report is not a replacement for the audit of the financial statements, and the auditor does not provide a general opinion that the business is compliant or that all transactions are correct. The auditor performs specified procedures and reports the factual findings arising from each procedure.
The report must be prepared in accordance with ISRS 4400 by an independent external auditor licensed in the UAE. It may be prepared by the auditor responsible for the annual financial statement audit or by another independent auditor licensed in the UAE.
Obtain valid trade, business or commercial licences or equivalent documents and inspect the listed activities for trading, wholesaling, retailing, distribution, manufacturing or other indicators of resale.
Obtain a signed and dated declaration or written confirmation relating to the relevant Tax Period and confirming that the goods or materials are acquired for sale, resale, or processing or alteration for sale or resale.
Inspect executed sales agreements, related invoices, purchase orders and other records, and document indications of onward sale such as bulk quantities, resale terms or relevant pricing structures.
The evidence, taken together, should demonstrate that the customer resells the goods or materials, or parts thereof, or processes or alters them for the purpose of sale or resale. Supplies to a public benefit entity are also addressed under the related qualifying activity rules.
Inspect customs declarations, import permits, sales contracts, bills of lading and equivalent documents showing lawful entry of the goods into the UAE through a Designated Zone.
Verify that the Free Zone, port or area identified in the import documents is formally recognised as a Designated Zone, supported by confirmation from the relevant Free Zone Authority.
Inspect inventory logs, warehousing reports, goods movement records and logistics documents to verify receipt, handling or storage within the Designated Zone before distribution.
The Decision defines a 10% Margin of Error and provides the following formula for determining the Sample Size from the Sample Population:
| Sample Population | Formula Result |
|---|---|
| 10 | 9.09 |
| 50 | 33.33 |
| 100 | 50.00 |
| 500 | 83.33 |
| 1,000 | 90.91 |
The figures above are the direct mathematical results. The Decision does not expressly state how fractional results should be rounded to a whole number, so the rounding approach should be determined and documented with the auditor before sample selection.
The Sample Population depends on the procedure and may be the total number of customers, sales agreements or imports during the Tax Period. The selected sample must include the items with the highest transaction values in the relevant Tax Period.
The agreed-upon procedures report must be submitted to the Federal Tax Authority no later than 30 days after the deadline for filing the Corporate Tax return for the relevant Tax Period, unless another date is specified by the FTA.
The Decision states that failure to submit the report means the relevant conditions under the audited financial statements decision and the qualifying and excluded activities decision are not considered met.
Because continued QFZP status depends on satisfying the legal conditions, non-compliance may cause the entity to cease being a Qualifying Free Zone Person from the beginning of the relevant Tax Period, with possible consequences extending to the following four Tax Periods under the general QFZP rules.
1Confirm the scope: Review the licence, actual activity, sales flow and import flow to determine whether the business carries on distribution in or from a Designated Zone.
2Update customer files: Maintain each customer’s licence, expiry date, licensed activities, reseller status and signed declaration for the relevant Tax Period.
3Link evidence to transactions: Connect each invoice, agreement and purchase order to the customer evidence supporting reseller status instead of keeping only general documents.
4Create an import file for each shipment: Include the customs declaration, import permit, bill of lading, receipt, warehousing and goods movement documents.
5Obtain Designated Zone confirmation: Retain evidence that the relevant port or area is legally recognised as a Designated Zone and obtain confirmation from the relevant authority where required.
6Prepare sample populations: Maintain complete customer, agreement and import listings with transaction values so the auditor can calculate and select the required samples.
7Engage the auditor early: Agree the engagement scope, procedures, required evidence, rounding approach and treatment of additional documents before the reporting deadline approaches.
8Perform a gap review: Identify customers, agreements or imports with missing or inconsistent evidence and address the gaps before the final report is prepared.
Reviewing the activity, supply chain, customers and imports to identify whether the Decision applies and what evidence the company needs.
Organising customer licences, declarations, agreements, invoices, import and customs documents, inventory reports and goods movement records.
Preparing complete sample populations, transaction values and supporting schedules to assist the licensed auditor in performing and documenting the procedures.
Performing a pre-review to identify missing, inconsistent or unlinked evidence that may affect the factual findings reported by the auditor.
Preparing the accounts and supporting file and coordinating with the independent external auditor licensed in the UAE who issues the ISRS 4400 report.
Introducing internal procedures, templates and records to collect reseller and importation evidence continuously during each Tax Period.
No. It applies to a Qualifying Free Zone Person engaged in the Qualifying Activity of distributing goods or materials in or from a Designated Zone, subject to the related legal conditions.
No. The Decision requires an additional agreed-upon procedures report. It may be prepared by the annual external auditor or by another independent auditor licensed in the UAE.
The declaration is important but it is not the only evidence. The procedures also inspect the customer licence, sales agreements, invoices, purchase orders and transaction records supporting actual resale or processing and alteration for sale or resale.
The Decision provides a sampling formula using a 10% Margin of Error and requires the highest-value items to be included. Nevertheless, the business should retain adequate documentation for all relevant transactions, not only the items later selected in the sample.
They are the actual results of each procedure, such as whether a licence was valid, a declaration was signed and dated, or customs and shipping documents showed entry through a Designated Zone. They do not constitute a general assurance opinion over the entire activity.
It applies to Tax Periods commencing on or after 1 January 2026. The Decision was issued on 2 June 2026 and published by the FTA within the Corporate Tax legislation section.
Federal Tax Authority Decision No. 6 of 2026: Determining the Additional Procedures for the Compliance of Qualifying Free Zone Persons Engaged in the Activity of Distribution of Goods or Materials in or from a Designated Zone for Corporate Tax purposes.
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