Diia City is an innovative legal platform created to support and develop the IT industry in Ukraine. The Diia City bill, adopted in 2021, introduces a special legal regime for technology companies, providing them with unique opportunities and benefits. In this article, we will examine the main aspects of Diia City, including residency conditions, taxation, benefits for individual entrepreneurs (IEs) and employees, as well as the features of gig contracts.
Diia City provides Ukrainian IT companies with a special legal status that ensures favorable conditions for doing business. The primary goal of this platform is to create a comfortable environment for attracting investments, fostering innovation, and supporting startups. Diia City allows companies to focus on their growth by relieving them of excessive bureaucracy and complex tax conditions.
Diia City offers attractive conditions for individual entrepreneurs (IEs) working in the IT sector. This regime allows IEs to take advantage of a simplified taxation system and reduced tax burden, making their activities more profitable and transparent.
Situation: A software developer who is an individual entrepreneur (IE) is engaged in developing mobile applications and has a small team of developers. He decided to take advantage of the opportunities provided by Diia City to grow his business.
The developer undergoes the registration procedure in Diia City. He submits an application, provides the necessary documents, and obtains the status of a Diia City resident. This gives him access to all the benefits and opportunities the regime offers.
As a Diia City resident, the developer can now benefit from a simplified tax regime:
- Income tax: The developer pays a single tax at a rate of 5%, significantly reducing his tax burden compared to the general taxation system.
- Exit capital tax: Instead of the profit tax, the developer pays 9% on withdrawn capital, encouraging him to reinvest funds into the growth of his company.
The developer registers his software products as intellectual property objects. Diia City ensures a high level of protection against unauthorized use of his developments, giving him confidence in the security of his technological solutions.
The developer decides to expand his team by attracting highly qualified specialists on gig contracts. This allows him to:
- Flexibly manage the team, adapting its composition to specific projects.
- Have transparent and legally protected employment relationships with specialists.
The developer uses the Diia City platform to find new clients. On the platform, he can find customers both in Ukraine and abroad, opening up access to the international market.
The developer and his team participate in training programs and webinars organized by Diia City. This allows them to enhance their skills, stay updated on the latest technologies, and remain competitive in the market.
The developer applies for a grant to develop his startup. Diia City provides him with financial support, allowing him to implement new ideas and expand his business.
By utilizing the opportunities offered by Diia City, the developer was able to optimize tax expenses, protect his intellectual property rights, expand his team, find new clients, and receive financial support for business development. This significantly increased the efficiency of his activities and his competitiveness in the market.
One of the main advantages of Diia City is its simplified taxation system. Diia City residents have the option to choose between the general taxation system and a simplified one, which includes:
- Personal income tax (PIT) — 5% of employee and IE income.
- Unified social contribution (USC) — 22% of the minimum wage.
- Military Levy — 1.5%.
Diia City residents who are VAT payers can take advantage of reduced rates and benefits. This helps to lower the tax burden on companies, allowing them to increase their investments in development and innovation.
Diia City residency is a status that grants companies the right to use all the benefits and opportunities provided by the bill. Both Ukrainian and foreign companies that meet the established criteria can become residents.
For employees, Diia City offers improved working conditions, including reduced tax burdens and the ability to work under gig contracts, providing flexibility and protection of social rights.
A gig contract is a new form of employment relationship that allows employees to collaborate with companies on more flexible terms. This type of contract provides the opportunity to enter into short-term or long-term agreements while ensuring the protection of employees' social rights.
Diia City is created specifically for the IT sector and technological startups. It offers a wide range of opportunities for business development and expansion, including access to investments, international markets, and advanced technologies.
Diia City is a revolutionary platform that opens new horizons for the development of the IT industry in Ukraine. With a special legal regime, tax discounts, and flexible working conditions, Diia City promotes investment, innovation, and the creation of new jobs. This is a significant step forward for the Ukrainian economy and a promising path to strengthening Ukraine's position in the global technology market.
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Serhii Floreskul
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Violetta Loseva
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