"Diia Metropolis": A particular authorized and tax regime for IT corporations in Ukraine comes into play – Tax


"Diia City": A special legal and tax regime for IT companies in Ukraine comes into play

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July 2021 – On July 15, 2021, the Ukrainian

Parliament has adopted the Law "On Promotion of Development"

of the digital economy in Ukraine "No. 4303

("City law of Diia"). To take effect,

the city law of Diia has to be signed by the president and officially

released*. The law comes into force on the following day


General regime of the city of Diiaia

The city law of Diia provides a general framework for the introduction of a

special IT industrial regime in Ukraine called Diia City, the

The aim is to create favorable framework conditions for companies that are active in

the tech industry. The regime lasts indefinitely

but not less than 25 years.

Diia City Resident Status is only available

to Ukrainian companies that meet the criteria of Diia. fulfill

City law, in particular:

  • the average monthly minimum employee / gig

    Employee is EUR 1,200;
  • performing IT-related activities that include:

    Software development activities, game publishing, EdTech, data

    Processing, cybersports and others as required by law;
  • the availability of at least 9 employees or gig workers on

    End of each calendar month;
  • the net income from skilled activities is at least 90% of the total

    Income; and
  • the company doesn't fall into a restricted category, since

    provided by law.

Diia City Law introduces, among other things:

  • Concert contracts – a new concept in Ukrainian law that is a mixture of

    an employment contract and a service contract. Gig contracts can

    be concluded in electronic form;
  • social guarantees for gig workers;
  • new rules for the distribution of IP rights to created objects

    by gig workers and white-collar workers;
  • Requirements for non-disclosure and non-competition obligations;
  • the conversion of outstanding debt into equity of Diia City

  • the concept of guarantees and compensations for

  • additional regulation for put / call option agreements;
  • the ability for Diia City residents to appoint legal counsel

    Entity as executive body; and
  • the possibility of the shareholder agreement foreign


Please note that the city law of Diia is subject to changes

Civil Code, Commercial Code, Labor Code and Law on Ukraine

Limited and additional liability companies, it will

an effect not only on the residents of Diia City, but also on the entire area

Regulatory landscape.

Diia City Tax System

The one for residents of Diia City and theirs

The workforce is regulated by an independent law. The bill

"About changes to the Tax Code of Ukraine in relation to the

Stimulating the development of the digital economy in Ukraine "

No. 5376 ("Diia City Tax Bill") was

adopted at first reading on June 2, 2021. The date of the second

Reading is not yet known.

The Diia City Tax Bill introduces the following tax

Services. Diia City residents (i.e., legal entities) can choose one

of two tax systems that may be applicable to them. Special,

You can choose to be subject to current corporate law

Income tax ("CIT") at a standard price of

18% based on profit (subject to tax adjustments, if applicable) or

Changeover to the new regime, which provides for CIT at a rate of 9%

Volume of certain transactions with non-payers of CIT (which a

a kind of exit capital tax).

When switching to special taxation, the tax

Diia City resident base would include, among other things:

the following payments to non-payers of CIT:

  • Service fees paid to private entrepreneurs from a certain

  • the import and export of goods and services under certain conditions

    conditions provided by law;
  • Payment of royalties / interest / dividends under certain conditions

    provided by law; and
  • Payments to nonprofits and zero interest

    Loans under certain conditions provided by law.

Employees / gig workers employed by residents of Diia City

subject to:

  • a reduced income tax of 5%

    Salary / remuneration;
  • a 1.5% military fee on salaries / wages; and
  • a uniform social contribution of 22%

    ("USC") on:
  • the salary of the employees of the residents of Diia City – in the amount

    the minimum USC; and
  • Remuneration for the provision of services within the framework of gig contracts

    (limited in between (i) the maximum upper limit calculated as 22% USCx15

    Minimum wages and (ii) minimum USC).

Overall, the Diia City regime will only come into effect once

Both Diia City laws have come into effect.

The content of this article is intended to be general

Instructions on the subject. Expert advice should be sought

about your particular circumstances.


Economic substance in Cyprus

Oxford management

Economic substance is a doctrine in international tax law that a transaction must have an economic purpose beyond reducing tax liability in order to be valid.

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