Are you legally conducting your business activities on social media?
In recent years, we have observed a
flourishing of businesses on social media. Primarily stay-at-home mothers selling cakes, clothing, handicrafts, beauty products, etc. through social media.
Nowadays, selling on social media pages such as
Instagram, Snapchat, Facebook and even WhatsApp has become commonplace. However, it should be noted that this practice is illegal if carried out without a commercial license. The authorities are on the lookout and are determined to catch anyone who fails to comply with the laws in force in the country.
Indeed, just five minutes of research on these platforms is enough to discover dozens and dozens of pages advertising and selling these types of products. Unfortunately, this new generation of entrepreneurs is poorly informed about the consequences of these activities, which are considered illegal.
The question of the legality of selling on social media arises. How can you legally run a business from home on social media?
In fact, selling on social media is not very different from conducting business on the mainland. In both cases,
you need a commercial license to operate legally.
Social media has given small businesses a cost-effective way to grow. If you hold a license, you are legally authorized to sell on Facebook, Instagram, or any other platform of your choice.
However, if an individual sells on social media without the appropriate license, they may face severe penalties of up to
AED 500,000, have their stock confiscated, and risk imprisonment.
In 2018, the government introduced major measures concerning these illegal online businesses. They made
obtaining a commercial license to do business on social media mandatory. In cooperation with the Telecommunications Regulatory Authority, they shut down hundreds of unauthorized e-commerce websites and social media pages.
The law is clear: anyone wishing to sell online needs a commercial license!
It is the Department of Economic Development
(DED) that issues commercial licenses to anyone wishing to conduct business in the country. Any type of business, online or offline, must obtain this license from the DED to operate legally and without concern in the UAE.
The new E-Trader license
In addition, the DED recently introduced
the E-Trader license to support people wishing to launch their business on social media. The government deemed it necessary to establish new rules and regulate the profession.
However, with this license,
only Emirati nationals can sell products that are “homemade,” for example.
This does not apply to expatriates. With the E-Trader license, an
expatriate can only sell services on social media (this is known as a professional license). If an expatriate needs to sell goods, they must hold a commercial license issued by the DED. This license is considerably more expensive. Note that the commercial license must be related to the products you sell.
Another low-cost way to conduct this type of business
is to open a company in your name in a free zone. However, having a license issued by a free-zone authority only allows you to sell within that same free zone. If you wish to sell your products outside your free zone, you must use a distributor who will sell your products on your behalf.
Consequences of COVID-19 and illegal activities
Unfortunately, this phenomenon
has intensified over the past year due to the COVID-19 crisis. Social media businesses have experienced a surprising boom. Most of these sellers are expatriates who were laid off from their jobs and found themselves in critical situations without income to survive the pandemic. For them, selling on social media was the only accessible way to generate income, stay afloat, and avoid sinking.
What needs to be understood is that
online selling is not a problem in itself, but each sector must comply with strict rules to protect both sellers and customers who buy online.
For example, home-based food preparation must comply with health and hygiene standards, while the sale of cosmetics or beauty products must comply with cosmetics regulations, etc.
In addition, any activity involving monetary transactions must be declared, and the business must be registered with the relevant authorities (
accounting records and an audit must be completed). For these online activities, they at least need an e-commerce license because monetary transactions are involved.
These individuals must understand that
these rules are not implemented to punish them but to protect them.
- Consider the case of a stay-at-home mother who prepares homemade meals and sells them online. A customer buys her product and suffers food poisoning or other much more serious health problems. This woman could face serious penalties and heavy fines for selling online without authorization.
From an ethical perspective, selling on social media without authorization is unfair to those who comply with the law and pay the authorities an annual license fee to legally operate their business.
In conclusion, if you are already selling on social media without a license or wish to start a business on social media,
contact Merritt Middle East: support@merritt.group and book your free consultation today!
One of our experts will help you understand all the implications of selling products on social media and the solution that best suits you.
