UAE QFZP Distributors: FTA Decision No. 6 of 2026

Key Takeaways

• FTA Decision No. 6 of 2026 (issued 2 June 2026) applies to a Qualifying Free Zone Person (QFZP) that distributes goods or materials in or from a Designated Zone. It adds a mandatory agreed-upon procedures (AUP) report, prepared under ISRS 4400.
• It applies to Tax Periods commencing on or after 1 January 2026. A calendar-year business is caught from the year ending 31 December 2026.
• The report must reach the FTA no later than 30 days after the Corporate Tax return deadline, which is nine months after the Tax Period ends.
• If the report is not submitted, the conditions are treated as not met. The likely consequence is loss of QFZP status from the start of that Tax Period and for the next four.
• Start the document work now. Customer licences, signed declarations and customs papers cannot be rebuilt in 30 days.

Introduction

The 0% Corporate Tax rate for free zone businesses is a rate on Qualifying Income earned by a Qualifying Free Zone Person. A licence in a zone does not decide either question. Distribution of goods or materials in or from a Designated Zone is one of the Qualifying Activities, but only on conditions about where the goods enter the UAE and who buys them.

Until now, a distributor could meet those conditions on the strength of its own records. FTA Decision No. 6 of 2026 changes that. The distributor must now obtain an independent auditor’s report that tests those records and file it with the FTA. This article sets out what the Decision says, the dates, and what to have ready. It reads the Decision together with Ministerial Decision No. 84 of 2025 (audited financial statements) and Ministerial Decision No. 229 of 2025 (Qualifying and Excluded Activities).

1. How the three instruments fit together

Ministerial Decision No. 229 of 2025 repeals Ministerial Decision No. 265 of 2023 and takes effect from 1 June 2023 (Art. 6 and 7). The Decision 6 requirements are separate and start later, with Tax Periods commencing on or after 1 January 2026.

Related changes in MD 229 that distributors should not miss: trading of Qualifying Commodities now turns on a Quoted Price and the exclusion of retail-packaged products, not on the “raw form” wording of the old decision, and it is not a Qualifying Activity if distribution, warehousing, logistics and inventory management make up 51% or more of Revenue for the Tax Period (Art. 1 and 2(3)(c)). Treasury and financing services now expressly include services “for its own account” (Art. 2(1)(j)). These points matter if your group mixes commodity trading with distribution.

2. What the AUP report must show

The auditor is either the independent external auditor who audits the annual financial statements, or any other independent auditor licensed in the UAE (Art. 2(1)). The report is prepared under ISRS 4400 and sets out procedures performed and factual findings. It is not an audit opinion. It must show two things (Art. 2(3)):

1. The QFZP supplies goods or materials to customers who resell them, or process or alter them for sale or resale.
2. Goods or materials entering the UAE, if imported by the QFZP, are imported through a Designated Zone.

Article 3 prescribes six procedures:

Sampling. Each procedure uses one formula: Sample Size = Sample Population / (1 + Sample Population x Margin of Error squared), with a margin of error fixed at 10% (Art. 3(3) and 3(4)). The sample must include the highest-value customers, agreements or imports. Each procedure is reported with the nature, timing and extent of the evidence and the sample details go in an appendix (Art. 3(6)).

Worked example (sampling). A distributor has 200 customers, 150 sales agreements and 60 imports in the Tax Period.

The Decision does not state a rounding rule. The prudent approach is to round up and agree it in the engagement letter. The sample population is a full list for the Tax Period, so build it from the ledger before the auditor starts.

3. Timeline and deadline

The 30 days run from the deadline to file the return, not from the date you actually file early. The Decision allows the FTA to set another date. We have found no FTA notice that does so.

Worked example (deadlines). The 30 days are counted as calendar days in the table below. The Decision has no weekend rule, so KCM’s practice is to plan for the last working day before the date.

The test is the start date of the Tax Period, not the year the return is filed. A business with a July to June year therefore has its first caught period start on 1 July 2026, and its first report is due in April 2028.

4. What happens if you miss it

If the report is not submitted, the conditions in MD 84 of 2025, Art. 2(3) and MD 229 of 2025, Art. 2(1)(l) are “not considered to be met” (Decision 6, Art. 2(8)). MD 229, Art. 5(1)(b) makes audited financial statements under MD 84 a condition of QFZP status, and Art. 5(2) says that a QFZP that fails a condition at any time during a Tax Period ceases to be a QFZP from the start of that Tax Period and for the next four Tax Periods.

A missed report is likely to put five consecutive Tax Periods at risk, not only the distribution income. For a calendar-year business whose first caught period is 2026, that is 2026 to 2030. The Decision itself says only that the conditions are not met, so the point is arguable, but the five-period exposure is the safer planning case.

5. Document checklist

Decision 6, Art. 2(4) and 2(5) list the documents a QFZP must collect, maintain and retain. The list is not closed.

Customer evidence (per customer, per Tax Period)
– Valid trade, business or commercial licence, or equivalent, indicating reselling or processing.
– Signed, dated declaration or written confirmation that goods are bought for sale or resale (or donation to a public benefit entity), relating to the Tax Period.
– Sales agreement, invoices, purchase orders or other transaction records showing onward supply.

Import evidence (per import)
– Import declaration and customs clearance documents showing lawful entry through a Designated Zone.
– Bill of lading, airway bill or equivalent transport document showing entry through a Designated Zone.
– Free Zone Authority confirmation that the zone is a Designated Zone.
– Inventory logs, warehousing reports, goods movement and logistics records.

For the auditor
– A complete customer list, agreement list and import list for the Tax Period, reconciled to the ledger.
– Revenue split by customer type, so end users and non-qualifying revenue are visible against the de minimis test (the lower of 5% of total Revenue or AED 5,000,000, MD 229, Art. 3).

Worked example (de minimis). Total Revenue is AED 80 million and non-qualifying Revenue is AED 3.2 million. 5% of 80 million is AED 4 million; the lower of AED 4 million and AED 5 million is AED 4 million. 3.2 million is below 4 million, so the test is met. At Revenue of AED 120 million, 5% is AED 6 million, so the cap is AED 5 million.

What to do

1. Confirm whether you are a Designated Zone distributor within MD 229, Art. 2(3)(l), and the date your first caught Tax Period began.
2. Split customers into resellers or processors, public benefit entities and end users. Sales to end users are not a Qualifying Activity. The FTA’s Free Zone Guide expects know-your-client checks and an undertaking or contract confirming the customer is not the end user.
3. Refresh licences and obtain declarations dated within the Tax Period. A declaration from an earlier year does not meet Procedure 2.
4. Map the importer, customs entry point and zone for each import route. Goods that are imported through a non-designated port and moved into the zone later are an exposure.
5. Appoint the auditor early, agree rounding and the treatment of public benefit entity sales, and set a date for the full populations. The six procedures test resale and importation; they do not separately address public benefit entity customers, so agree that treatment under Art. 3(5).
6. Diary the return deadline and the report deadline together.

FAQ

Does the Decision apply to every free zone company?
No. It applies to a QFZP engaged in the Qualifying Activity of distribution of goods or materials in or from a Designated Zone. A QFZP in other Qualifying Activities remains subject to the general audited financial statements requirement under MD 84 of 2025.

Can our annual auditor prepare the AUP report?
Yes. The report may come from the independent external auditor responsible for the annual audit or any other independent auditor licensed in the UAE (Art. 2(1)). The auditor reports factual findings and does not give an opinion on QFZP status.

We have a 30 June year end. Is the first report due in 2027?
No. The Tax Period 1 July 2025 to 30 June 2026 began before 1 January 2026 and is not caught. The Tax Period starting 1 July 2026 is the first, and the report is due 30 days after its return deadline of 31 March 2028.

Do we need the report if we do not import?
The report must show that goods are imported through a Designated Zone “if imported by the QFZP”. The FTA Free Zone Guide notes the requirement for goods to enter via a Designated Zone applies to foreign goods supplied to customers in the UAE outside a Designated Zone. The reseller procedures still apply, and the report is still required. Agree the scope with the auditor.

Is there an FTA template or portal for filing?
The Decision says the report is submitted “to the Authority” and does not prescribe a form or portal. Confirm the channel on EmaraTax or with the FTA before the deadline.

Related KCM pieces

• UAE free zone corporate tax: QFZP rules
• UAE Corporate Tax services
• UAE company or branch? POEM and free zone tax risk

Talk to us about your QFZP position: contact KCM.

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Sources and last checked: 6 November 2026

1. FTA Decision No. 6 of 2026 on Determining the Additional Procedures for the Compliance of QFZPs (unofficial English translation, tax.gov.ae): https://tax.gov.ae/Datafolder/Files/Legislation/2026/FTA%20Decision%20No.%206%20of%202026%20on%20Determining%20the%20Additional%20Procedures%20for%20the%20Compliance%20of%20QFZP%20-%20for%20publishing%20-%2007%202026.pdf
2. Ministerial Decision No. 84 of 2025 on Audited Financial Statements (MoF): https://mof.gov.ae/wp-content/uploads/2025/04/Ministerial-Decision-No.-84-of-2025-on-Audited-Financial-Statements.pdf
3. Ministerial Decision No. 229 of 2025 on Qualifying Activities and Excluded Activities (MoF): https://mof.gov.ae/wp-content/uploads/2025/09/EN-Ministerial-Decision-No.-229-of-2025-Regarding-Qualifying-Activities-and-Excluded-Activities.pdf
4. FTA Corporate Tax Guide, Tax Returns (CTGTXR1), section 3, 9 months from end of Tax Period (Art. 53(1) CT Law): https://www.tax.gov.ae/Datafolder/Files/Guides/CT/CT-Returns-EN-11-11-2024.pdf
5. FTA Corporate Tax Guide, Free Zone Persons (CTGFZP1, May 2024), section 10.14: https://tax.gov.ae/Datafolder/Files/Guides/CT/Free%20Zone%20Persons%20-%2020%2005%202024%20final%20for%20GCD.pdf
6. FTA legislation page: https://tax.gov.ae/en/legislation.aspx
   – Originally shared on LinkedIn by Suril Mehta: https://www.linkedin.com/posts/surilm_a-designated-zone-licence-never-gave-you-share-7486042506833481728-MH-v/
   – Originally shared on LinkedIn by Suril Mehta: https://www.linkedin.com/posts/surilm_uaecorporatetax-qfzp-share-7372843488914206721-uvmP/

The summary of Ministerial Decision No. 229 of 2025 was first shared by CA Jigisha Mankad, KCM.

This is not to be construed as legal advice. The actual advice will depend upon the facts and will have to take into consideration the case-specific facts and the anti-abuse regulations.