Introduction
The UAE's 0% Corporate Tax regime for Qualifying Free Zone Persons (QFZPs) continues to provide an important tax benefit to eligible Free Zone businesses. However, benefiting from the 0% rate requires businesses to satisfy specific conditions and maintain appropriate evidence.
A significant development for 2026 is Federal Tax Authority (FTA) Decision No. 6 of 2026, issued on 2 June 2026 and published by the FTA on 14 July 2026. The decision establishes additional procedures for demonstrating compliance with the QFZP rules, specifically for businesses carrying out the qualifying activity of distributing goods or materials in or from a Designated Zone.
The decision applies to tax periods beginning on or after 1 January 2026. For affected businesses, compliance is no longer only about having a Free Zone licence and conducting distribution activities. They must also be prepared to provide independent verification and supporting documentation.
What Is FTA Decision No. 6 of 2026?
FTA Decision No. 6 of 2026 introduces additional procedures that certain QFZPs must follow to demonstrate that they satisfy the requirements for the qualifying distribution activity.
It should not be interpreted as a new rule affecting every Free Zone company.
Instead, it specifically focuses on QFZPs carrying out the qualifying activity of distribution of goods or materials in or from a Designated Zone, as recognised under the UAE Corporate Tax framework and Ministerial Decision No. 229 of 2025.
The FTA's legislation portal categorises the decision under Corporate Tax and confirms its issue date of 2 June 2026.
Does This Affect Every Free Zone Company?
No.
A Free Zone company must first qualify as a QFZP to benefit from the preferential 0% Corporate Tax treatment on qualifying income.
However, this particular additional procedure is targeted at QFZPs undertaking the qualifying distribution activity covered by the decision.
Therefore, a Free Zone consultancy, software company, holding company or another QFZP carrying out a different qualifying activity should not automatically assume that this specific AUP requirement applies to it.
Businesses should assess their actual activities and revenue streams rather than relying only on their trade licence description.
The New Agreed-Upon Procedures Report
The most important requirement introduced by the decision is the need for an Agreed-Upon Procedures (AUP) report from an independent external auditor.
The report must be prepared in accordance with ISRS 4400, the international standard covering agreed-upon procedures engagements.
An AUP engagement is different from a conventional financial statement audit. Instead of providing a general audit opinion, the independent auditor performs specific procedures and reports factual findings on the matters covered by those procedures.
For affected QFZPs, this provides an independent method of verifying whether the business has satisfied the conditions relevant to its qualifying distribution activity.
What Must the Business Prove?
One of the most important areas is the nature of the company's customers.
The business needs evidence demonstrating that customers receiving the goods or materials meet the requirements relevant to the qualifying distribution activity. This can involve establishing that customers resell the goods or materials, or process or alter them for sale or resale, subject to the applicable rules.
This means distributors should not simply record a customer as a âbusiness customerâ and assume that the transaction qualifies.
The company should maintain appropriate documentation that supports the customer's actual business activity and the purpose for which the goods were purchased.
Customer Documentation Is Now Critical
Businesses should maintain strong evidence for their customer relationships.
Relevant documentation can include the customer's valid trade or commercial licence, particularly where it demonstrates trading, wholesale, retail, distribution or manufacturing activities.
Companies may also maintain signed customer declarations confirming that goods are acquired for resale or onward supply.
Sales contracts, purchase orders, invoices and other commercial records can provide additional evidence supporting the nature of the transaction.
For affected businesses, this means customer due diligence is becoming an important part of Corporate Tax compliance, not simply a sales or administrative function.
Imported Goods and Designated Zones
The decision also places importance on the movement of imported goods.
Where a QFZP imports goods into the UAE, the business needs to demonstrate that the goods entered the UAE through a Designated Zone, where this condition applies to the qualifying distribution activity.
Businesses should therefore retain appropriate customs and logistics records, such as import declarations, customs clearance documents, bills of lading and other shipping documentation.
These records can become important evidence when the independent auditor performs the agreed procedures.
A business that cannot demonstrate the required movement of goods may face difficulty supporting its claim that the relevant income qualifies under the QFZP regime.
When Must the AUP Report Be Submitted?
The AUP report must be submitted to the FTA within 30 days after the deadline for filing the Corporate Tax return for the relevant tax period, unless the FTA specifies another date.
This means businesses should not wait until the Corporate Tax filing deadline to begin preparing the documentation.
The accounting team, tax adviser and external auditor should coordinate early so that the AUP procedures can be completed and the report submitted within the required timeframe.
What Happens If the Report Is Not Submitted?
This is one of the most important aspects of the new decision.
Where the required AUP report is not submitted, the relevant conditions for the qualifying distribution activity will not be considered satisfied.
For businesses relying on the QFZP regime, this can create a significant Corporate Tax compliance risk.
The practical message is clear: the AUP report should not be treated as optional paperwork. Businesses affected by the decision need to build the requirement into their annual tax-compliance process.
How Businesses Can Prepare for 2026
Affected Free Zone distributors should begin by reviewing their revenue streams and confirming whether they are relying on the qualifying distribution activity.
Next, businesses should review their customer files and ensure they have appropriate evidence showing the customers' qualifying status or resale activities.
Importers should also organise customs, shipping and Designated Zone documentation.
Accounting records should clearly connect sales transactions with invoices, customers and supporting documentation. This makes the auditor's review more efficient and reduces the risk of missing evidence.
Finally, businesses should engage an independent external auditor early enough to complete the AUP procedures before the submission deadline.
Why Professional Accounting Support Matters
QFZP compliance increasingly requires coordination between accounting, tax, operations, customs documentation and external audit.
A business may conduct the correct activity but still face compliance difficulties if its records do not adequately demonstrate what happened.
Accurate bookkeeping and organised documentation can therefore become a critical part of protecting the company's Corporate Tax position.
Businesses should also regularly review whether their actual activities continue to match the requirements for qualifying income.
Conclusion
FTA Decision No. 6 of 2026 represents an important compliance development for UAE Free Zone businesses involved in qualifying distribution activities.
The decision does not mean that every Free Zone company must obtain an AUP report. Instead, it introduces additional procedures specifically for relevant QFZPs distributing goods or materials in or from a Designated Zone.
For affected businesses, the key priorities are customer documentation, import and customs evidence, proper accounting records, independent AUP verification and timely submission to the FTA.
The 0% Corporate Tax regime can provide significant benefits, but businesses must be able to demonstrate that they meet the applicable conditions.
In 2026, the message for Free Zone distributors is straightforward: 0% Corporate Tax requires more than eligibilityâit requires evidence and compliance.
Frequently Asked Questions (FAQ)
1. What is FTA Decision No. 6 of 2026?
It is an FTA decision establishing additional procedures for demonstrating QFZP compliance, particularly for the qualifying activity of distributing goods or materials in or from a Designated Zone.
2. Does the decision apply to every UAE Free Zone company?
No. The additional AUP procedures are specifically relevant to QFZPs carrying out the qualifying distribution activity covered by the decision.
3. What is an AUP report?
An Agreed-Upon Procedures report is a report prepared by an independent external auditor following specifically agreed procedures. It reports factual findings rather than providing a conventional audit opinion.
4. What customer evidence should distributors maintain?
Businesses should maintain appropriate evidence such as customer licences, declarations, sales agreements, purchase orders, invoices and other records supporting the customer's resale or onward-supply activities.
5. When does FTA Decision No. 6 of 2026 apply?
The decision applies to tax periods beginning on or after 1 January 2026.
6. When must the AUP report be submitted?
The report must generally be submitted within 30 days after the deadline for filing the Corporate Tax return for the relevant tax period, unless the FTA specifies another date.
How Essence Can Help
At Essence, we help Free Zone businesses manage their accounting and Corporate Tax compliance requirements in line with the UAE's evolving tax framework.
Our team can assist with QFZP assessments, Corporate Tax registration, accounting and bookkeeping, qualifying-income reviews, Corporate Tax return preparation, documentation reviews and coordination with external auditors.
For businesses carrying out qualifying distribution activities, we can also help establish an organised accounting and documentation process so that customer, sales, import and other supporting records are ready for the relevant compliance requirements.
Our services include:
Corporate Tax Registration
QFZP Assessment
Qualifying Income Review
Corporate Tax Return Filing
Accounting & Bookkeeping
Financial Statements
Audit Coordination
Transfer Pricing Support
VAT Compliance
FTA Compliance Review
Corporate Tax Advisory
Contact Essence
Need help understanding whether FTA Decision No. 6 of 2026 affects your Free Zone business?
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Disclaimer
This article is intended for general informational purposes only and should not be considered tax, legal, accounting or audit advice. The application of the QFZP regime depends on the specific activities, transactions, customers, revenue streams and circumstances of each business. Free Zone companies should review the latest UAE Corporate Tax legislation and FTA guidance and obtain professional advice before determining their tax treatment.
