[TechUkraine news] Rada passes law on ‘Diia City’

The Verkhovna Rada at second reading adopted bill No.5376 on amendments to the Tax Code of Ukraine regarding stimulating the development of the digital economy in Ukraine, which regulates the tax conditions of the Diia City special legal mode.

The law introduces special conditions for taxation of companies-residents of Diia City, the income of their employees and involved gig-specialists. In particular, residents of the special mode will be able, at their discretion, to choose which corporate tax to pay: tax on withdrawn capital in the amount of 9% or income tax (18%).

  • In order to stimulate investment in the IT industry, income of individuals in the form of dividends accrued by a resident company will be exempt from taxation, provided that they are paid no more than once every two years, in order to encourage companies to reinvest funds in their development.
  • There will also be a tax rebate for individuals when buying a stake in a startup company that is a resident of Diia City.
  • The following tax rates will apply to the income of employees and gig-specialists of Diia City residents: personal income tax some 5%, unified social tax some 22% of the minimum wage, military tax some 1.5% (from the employee’s salary or gig-employee remuneration). If a specialist earns more than EUR 240,000 per year, then all income above this limit will be taxed at 18% personal income tax.

The Diia City conditions will be valid for 25 years and will be extended to all employees of the resident companies.