Additional compliance procedures for Qualifying Free Zone Persons (QFZP) engaged in distribution activities

QFZPs carrying out the qualifying activity of distribution of goods or materials in or from a designated zone must obtain an AUP report from an independent external auditor (who is also responsible for the annual audit of the financial statements or any other independent auditor licensed in the UAE).

The AUP report must be prepared in accordance with the International Standard on Related Services (ISRS) 4400, as issued by the International Auditing and Assurance Standards Board (IAASB).

The AUP report must confirm that:

• The QFZP supplies goods or materials to customers that resell them, including after processing or alteration
• Goods or materials entering the State, if imported by the QFZP, are imported through a Designated Zone.

QFZPs must collect and retain sufficient documentation to demonstrate that customers qualify as resellers. Such documentation may include:

• Valid business, trade, or commercial licences indicating that the customers carry out resale activities
• Signed declarations or other written confirmations that the goods were acquired for sale, resale or donation to a public benefit entity
• Sales agreements, invoices, purchase orders, or other transactional records demonstrating resale or onward supply activity

QFZPs must retain documentation showing that goods entering the State were imported through a designated zone, including:

• Import declarations and customs clearance documents evidencing lawful entry through a Designated Zone
• Shipping documents, such as a bill of lading, airway bill, or equivalent document, showing entry through a designated zone

The decision specifies detailed procedures for verifying:

• Reseller status – inspection of customer trade licences, verification of customer declarations/confirmations, and review of sales agreements and transactional records
• Designated Zone importation – inspection of import documentation, confirmation of Designated Zone status, and inspection of internal records (inventory logs, warehousing reports, goods movement records)

• Sample size formula: Sample size = Sample population / [1 + (Sample population × (Margin of error)²)]
• Margin of error is fixed at 10%
• Sample population means the total number of customers, sales agreements, or imports (as applicable)
• Sample size must include those with the highest distribution transaction values in the relevant tax period

The AUP report must be submitted to the FTA no later than 30 days following the deadline to file the Corporate Tax return for the relevant tax period (or such other date as determined by the FTA).

Failure to submit the AUP report will mean that the QFZP does not meet the conditions for the distribution qualifying activity.