On August 11, 2021, the President of Ukraine V. Zelenskiy signed the law “On stimulating the development of the digital economy in Ukraine”, also known as the law on “Diia City” (hereinafter – the “Law”). The Law is aimed at creating favorable conditions for the development of the IT sector, digital infrastructure, conducting innovative business, as well as attracting investment to Ukraine.
The main issue regulated by the Law is the introduction of a new legal regime “Diia City” for the functioning of Ukrainian IT companies – an alternative to the current legislation.
In particular, the law contains the following provisions:
- The terms of the legal regime are not subject to change for 25 years;
- Personal income tax is reduced from 18% to 5%; the single social security tax is 22% of the minimum wage; the ability to choose to pay corporate tax: profit tax (18%) or distributed profit tax at the rate of 9%, etc.;
- In the field of labor and civil law relations, the concepts of “gig-contract”, “gig-specialist” are introduced, the provisions of the NCA (non-compete agreement), compulsory state insurance of gig specialists, etc. are fixed.
It should be noted that the Law enters into force the next day after its publication, except for p. 9, part 4, art. 5 which determines the peculiarities of legal relations in the field of virtual assets circulation. This provision will become effective 6 months after the entry of the Law of Ukraine “On Virtual Assets” into force.
How SCHNEIDER GROUP can help
If your company is considering the possibility of conducting business on the terms of “Diia City”, please contact us. SCHNEIDER GROUP legal and tax practice specialists in Ukraine are ready to advise you on the specifics of the current legislation of Ukraine on this issue.