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Status of Diia City framework in Ukraine

President Volodymyr Zelenskyy signed the Law "On stimulating the development of the digital economy in Ukraine" No. 1667 (No. 4303), which describes the operating conditions of the "Diia City" regime, which the parliament adopted on July 15, 2021. The virtual economic zone Diia City is set to start operating as of 2022.

 

The law introduces several concepts that are new to Ukrainian legislation, for example, gig contracts that a company can conclude with an individual to perform tasks, as well as reduced tax rates for participants in the "Diia City" regime. The overall aim is to create a framework for the large IT sector in Ukraine which ultimately would attract even more investment in IT than at the moment.

 

The key provisions of the "Diia City" mode are the following points:

 

-       The "Diia City" regime is introduced for at least 25 years from the date of the entry in the register of its first resident;

-       Participation in "Diia City" is voluntary;

-       Only companies in the field of IT and related areas can become residents of "Diia City";

-       The average monthly salary of an employee of "Diia City" should be 1200 euros in equivalent;

-       The company can attract employees to the staff, as a sole proprietorship and under gig contracts. Experts are also free to choose the form of cooperation with the resident "Diia City";

-       The tax rates for residents are as follows: personal income tax 5%, ERUs in the amount of the minimum insurance premium for employees of resident companies, corporate tax to choose from: either income tax 18%, or tax on withdrawn capital 9%, military tax - 1.5%.

-       The law also contains norms related to temporary disability and social guarantees for gig specialists, their state social insurance, as well as intellectual property rights to an object created in connection with the fulfillment of a gig contract.

 

The virtual economic zone Diia City will start operating as of 2022, and currently companies in the IT sector are evaluating whether or not they should become members. The experts in the legal sector in Ukraine are preparing to help their clients with questions regarding Diia City.

 

The answers to questions about the procedure of joining, its duration, and various other questions will become clearer as we move toward Spring 2022. If you have questions about Diia City or are considering joining it, feel free to get in touch with Leinonen.


30.11.21


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