Dія Сіty legal regime

Dія Сіty – what is it? 

“Дія Сity”, a scale project run by the Ukrainian Ministry of Digital Transformation, aims at introducing and developing a dedicated legal regime for the IT sector throughout the country. In particular, it implies a number of benefits for resident companies, specific tax scheme and a unified form for employing IT specialists. At present, Dia Сіty bill drafts are under review, and this regime is not yet operating. Its launch is projected for the 1st quarter of 2022.

Дія City implies a whole range of incentives to boost Ukrainian IT sector’s transfer from an extensive to an intensive growth pattern.

Who will be able to become a Дія City resident?

Residents of Ukraine – legal entities registered in accordance with Ukrainian laws.

What kind of registration will Дія City’s register offer?

Registration will be only technical. It is assumed that applicant companies will be included into the register right after filing their applications. Becoming a Дія City’s resident is a voluntary act on the basis of an application, provided certain formal criteria are met.

What will be the criteria to enter Дія City?

For existing companies:

  • carrying out activities compliant with Дія Сity regime
  • 90% of income must be drawn from such activities
  • average salary of employees and GIG specialists must be at least 1,200 euros
  • 9+ employees, GIG specialists 
  • no ‘negative’ criteria

For start-ups:

  • carrying out activities compliant with Дія Сity regime
  • 90% of income must be drawn from such activities
  • must be registered at most 24 months prior to filing
  • total annual income must not exceed 7 mln UAH
  • no ‘negative’ criteria

Types of activities compliant with Дія Сity regime

  • software engineering/testing, including games
  • publishing of computer games and other software, distribution of software
  • training computer/digital competences, programming, testing, technical maintenance
  • Digital marketing/ads using software developed through resident’s efforts
  • R&D in IT/telecom sector
  • cyber-sports
  • providing services involving turnover of virtual assets

‘Negative’ criteria for entering Дiя City:

  • companies not residing in Ukraine 
  • companies having at least 25% state share
  • non-commercial entities
  • companies with beneficiaries not revealed in the Unified State Register
  • company from an aggressor state (or owned by a resident of an aggressor state)
  • company of a state listed in the FATF list (25%+)
  • company under sanctions
  • company recognised as a bankrupt
  • company in the ‘suspended’ status (except re-organisation purposes)
  • 30+ days of past-due debt to budget of at least 10+ minimum salary
  • provider of virtual assets has violated terms and conditions of such services

Дiя City taxes

  1. Labour taxes
    • 5% – personal income tax 
    • 22% – unified social levy (similar to Belarusian SSF contribution) calculated on the basis of minimum salary
    • 1.5% – military levy
  2. Company/participants taxes
    • 9% on ‘divested capital’ or 18% profit tax (tax unit to be chosen by company)
    • 0% personal income tax on dividends, where dividends have not been distributed for 2+ years
  3. To boost ‘angel’ investments
    • tax benefit (equal to the amount of income of natural persons) on all sums invested into Ukrainian start-ups
    • 0% on personal income from selling a share in a start-up, provided such seller has owned such share for 1+ year

Who are GIG specialists

GIG specialists will enjoy the privileges of freelancers and additional social safety net.
Residents will be able to independently choose whether they prefer to hire employees under employment contracts, engage GIG-specialists or engage contractors (including NPEs). 

Peculiarities of GIG contracts:

  • a GIG contract is not an employment contract and is not regulated by the Labour Code
  • GIG contract is a civil law contract 
  • this kind of engagement is as flexible as engaging a NPE, however offers bigger social safety net
  • consulting
  • consulting on ways of doing business in Ukraine (in particular, considering the Dia City special regime)
  • formalising legal presence
  • formalising legal presence in Ukraine – IE (NPE) or legal entity, LLC (ТОВ)
  • operating company management
  • services for the purpose of operating company management (exercising CEO’s functions)
  • legal support
  • operating legal support: engaging employees (including foreigners), resolving migration issues (including those of family members), current consulting

How can we help?

  • consulting
    consulting on ways of doing business in Ukraine (in particular, considering the prospects of the Dia City special regime) 
  • formalising legal presence
    formalising legal presence in Ukraine – IE (NPE) or legal entity, LLC (ТОВ)
  • operating company management
    services for the purpose of operating company management (exercising CEO’s functions)
  • legal support
    operating legal support: engaging employees (including foreigners), resolving migration issues (including those of family members), current consulting