Key elements of the special tax system for Diia City residents
- the possibility to choose voluntary the taxation system between the payment of income tax (18%) and the withholding tax at a rate of 9%;
- the exemption from personal income tax in the form of dividends accrued by the resident company, if such dividends are paid not more often than for 2 years;
- a zero rate of income tax on the sale by an individual of a share in a Diia City resident company in case such individual owned the share for more than 1 year;
- tax discount for individuals in case of purchase of a share in a startup company that is a Diia City resident;
- reduction of the personal income tax rate in the amount of 5% ( applicable to employees’ salaries under employment contracts, remuneration of gig employees under gig contracts, royalties for the creation of work product and transfer of rights to such work products), a single social contribution – 22% from the amount of the minimum wage, and the military fee – 1,5%;
- as of 2024, costs of resident companies for single taxpayers (including, individual entrepreneurs of the third group) should not exceed 50%, and as of 2025 – 20%;
- Diia City residents, which remain to be the income taxpayers on the general system and the annual income of which does not exceed UAH 40 million, will be able to work with individual entrepreneurs without any restrictions for the whole duration of the special regime;
- Diia City conditions will be valid for 25 years and will apply to all specialists of resident companies;
The adoption of Draft Law No. 5376 is, of course, an important step towards the development of the IT sphere in Ukraine. Creating a progressive and clear tax system is a requirement of the majority of IT industry representatives – that is finally implemented on the legislative level.
Besides that, the introduction of the withholding tax, which has been discussed at the highest level for many years as a mechanism to stimulate development and reinvestment – has been finally implemented in the Ukrainian legislation, which is certainly a positive and significant moment for Ukraine.
Therefore, the adoption of the tax system, the balance of which was developed and proposed by IT industry representatives, creates a truly competitive environment in Ukraine for attracting foreign investment in IT development. Moreover, given the progressiveness of the adopted tax system and the full launch of the special Diia City regime at the beginning of 2022, Ukraine has all the necessary elements to realize its potential as well as a real opportunity to claim the status of a global IT hub.
ANDREY ASTAPOV, Managing Partner and Head of Dispute Resolution Practice, ETERNA LAW