Compliance Requirement

New UAE Compliance Requirement for Free Zone Distributors — FTA Decision No. 6 of 2026:

What has changed:

The FTA has introduced a mandatory additional procedure for potentially Qualifying Free Zone Persons (QFZPs) engaged in the distribution of goods or materials in or from a Designated Zone to qualify for the 0% rate of corporate tax. Failure to complete the procedures means that 9% rather than 0% tax rate is payable.

Key requirements:

A QFZP must obtain an agreed-upon procedures (AUP) report from an independent licensed auditor, prepared under ISRS 4400 as issued by the IAASB. The report must verify two things: (1) customers are genuine resellers (or process/alter goods for resale), and (2) imported goods enter the UAE through a Designated Zone The testing is sample-based, using a prescribed statistical formula with a 10% margin of error, focused on the highest-value customers, contracts, and imports. The AUP report must be filed with the FTA within 30 days after the Corporate Tax return deadline ie the end of October for a 31 December year end client. Failure to submit means the distribution activity conditions are deemed not met — putting the 0% Qualifying Income benefit at risk.

These requirements are neither simple nor straightforward.

The FTA's reliance on ISRS 4400 constitutes an alignment with international tax and assurance practices, moving toward evidence-based, substance-driven compliance consistent with global standards. For UAE free zone businesses, this raises the bar: robust documentation (customer licenses, reseller declarations, customs records, inventory logs) is no longer best practice — it's a condition for preserving the 0% rate.

How can PB First help:

We have developed a listing of the information to be obtained, the process to be completed and the documents to be assembled. We can retain the documents and share them with the auditor and respond to the auditor’s questions. We can also introduce a taxpayer to an audit firm PB First has pre-validated as being competent to prepare the report. And finally, we will ensure the report fairly represents your position.