On December 14, 2021, the Ukrainian parliament adopted the Law on Amendments to the Tax Code on stimulating the development of the digital economy in Ukraine.
This law became the second to regulate the activities of future residents of Diia City, a special legal and tax regime for the IT industry.
“We are working to ensure that Ukraine is known in the world as a comfortable place for business with the best service, tax system, and security. In order for technology companies and startups to develop in Ukraine, we are creating Diia City – a regime with the best tax conditions. There will be no bureaucracy and corruption because all possible protectors are engaged. Diia City will help Ukraine to take its rightful place among the world leaders of the digital economy”, said Vice Prime Minister – Minister of Digital Transformation of Ukraine Mikhail Fedorov.
The tax bill provides for the following conditions:
- Ability to choose which corporate tax to pay: withdrawn capital tax (WCT) in the amount of 9% or income tax – 18%.
- Special rates for employees of IT companies and gig specialists: individual income tax – 5%, Unified social contribution – 22% of the minimum wage, military tax – 1.5%. If a specialist receives more than 240 thousand euros per year, then all income above this limit will be taxed at 18% personal income tax.
- The transition period from the sole proprietorship model to gig contracts and labor contracts. From 2024, the expenses of resident companies on sole proprietorship should not exceed 50%, and from 2025 – 20%. Until that time, there are no restrictions. Taxation of sole proprietors who will cooperate with residents of Diia City will remain at the current rates.
- Amounts in excess of the limit for WCT payers will be taxed at a rate of 9%. Payers of income tax expenses for a sole proprietorship in excess of the permitted 20% will have to include in the financial result.
- Resident companies that will pay income tax and whose annual income does not exceed UAH 40 million will be able to work with an individual entrepreneur without restrictions after 2025.
- 0% on income of individuals as dividends accrued by a resident company, provided they are paid no more than 1 time in 2 years;
- Tax rebate (with individual income tax) on the amount of investments in Ukrainian startups.
By law, the conditions of Diia City can only be improved for a period of 25 years.