Successful business owners would have faced up to two years in jail if they failed to register under the previously flawed law. Vietnam’s lawmakers have officially removed a controversial clause from the Penal Code that would have allowed criminal proceedings to be taken against unregistered online businesses with possible jail sentences.
The legislative National Assembly passed the revised Penal Code on Tuesday and agreed to remove Article 292.
Under the article, companies that provide online services without being properly registered would be fined as usual, just like most business offenses. However, businesses that generate a profit of VND50 million ($2,200) or revenue of VND500 million would have faced criminal charges and a potential two-year jail term.
The article was enshrined in the 2015 Penal Code, which itself was scheduled to come into effect last year but was postponed due to multiple errors and loopholes. Article 292 was one of the most controversial parts of the code.
Last October, the government agreed that the rule should be scrapped after it met with strong opposition, including a petition with 6,000 signatures from the local startup community.
The Vietnam Chamber of Commerce and Industry also asked legislators to scrap the article, warning that the rule would have negative impacts on the economy and inhibit the modern era of online services and startups.
Vietnamese authorities have been trying to gain stronger control over online businesses. Hanoi and Ho Chi Minh City have both launched tax collection campaigns targeting retailers on Facebook, the country’s most popular social network.
Hanoi’s tax department this week called on 13,422 retailers that use the Facebook platform to register and pay taxes. The move follows a similar push by Ho Chi Minh City that covered around 13,500 retailers.