| Kippreport.com

Free zone visas and accounting creativity

December 11, 2012 11:04 by kippreport

Mo Elzubeir is the Managing Director of Mediastow.

Recently, Dubai free zone companies have been coming under increasing scrutiny by the authorities. Some suggest that this is coming from the federal government as free zones are “essentially a circumvention of the law”. Others suggest that this is coming from Dubai government, as it sees more business going to free zones in other Northern Emirates. Quite frankly, I don’t know what the truth is and may never know. What I do know is how this is affecting my business.

Over the past 6 years, we have not had a single “Inspector” walk in to our office asking people for their identifications. We also never illegally employed anyone anyway, so it was never really something we thought about. Last month, we’ve had our first. I wasn’t in Dubai at the time so I missed it. When speaking with other businesses in the TECOM free zone area, I have found that others have had far more visits over the same period. Some are suggesting that this is an attempt to generate revenue. Each offense gets you a AED 50,000/- fine.

The reasons people set up shop in the free zones vary from one to another. Personally, it is the 100% foreign ownership that brings me here and absolutely nothing else. The deal is simple, come in, set up shop and you can employ people depending on how much real estate you take. Then, TECOM found a way to get around this by increasing the quota by up to 15%. In return, every time you ask for a visa while over-quota, they charge you an additional AED 1,000/-.

In my case, I don’t need additional space. I need more people, but I don’t need additional space. I really don’t. So, I simply started moving jobs outside of Dubai. Their loss.

A few days ago we applied for an employment residence permit and we did not want the person to have to exit the country. This can be done by what they call an “In-country local amendment”. That is, they amend your visa status while you’re in the country. It costs AED 820/- and it is an alternative to having to exit the country, spend a few days elsewhere while waiting for your visa to be issued. We almost always opt for this option unless the person we hired came in on Tourist visa or an On-arrival visa (both of which require that you exit the country, regardless).

You can imagine my surprise when I found that we had to pay an additional AED 820/- for “Local amendment”. But we already paid. No, they said. You paid for “In-country”. No, really. They divided it into two parts, effectively increasing the fee by 100%. Here is how it was explained to me:

In-country: We process your visa while you are in the country.

Local-amedment: We .. ah.. amend your visa while you’re still in the country

I know, right? So I asked the TECOM guy on the phone why they’re making our lives difficult. He said, this is because sometimes people end up “overstaying” while their visas are being processed. I’m not sure how that relates, but it does bring up an interesting problem.

Immigration places fines on anyone who overstays. That’s fair. The only problem is that the clock doesn’t stop when you apply for a visa. The clock keeps running while the person is being cleared by security. You see, Security is this part of immigration that no one has any control over. You cannot predict how long it will take for them to clear someone. Different nationalities have different average waiting times, but it is still impossible to have any control over it. You can’t have an “express” security clearance for instance.

I fully appreciate the need for security clearance and since I don’t understand what they actually do, have no comment on the subject. However, I don’t understand why the clock is not stopped at that point. It’s common practice anywhere else in the world that I’ve been to.

Either way, I just thought the dividing up the In-country local amendment into two parts and charging AED 820/- for each one of them is one creative way to generate revenue. What do you think?