Diia.City is a unique legal and tax regime created to stimulate the development of the IT industry in Ukraine. This regime provides for certain conditions and benefits for IT companies that become its residents.

The launch of Diya.City was part of a larger initiative aimed at developing Ukraine's digital economy. The main goal was to create attractive conditions for IT business, including a favorable tax burden and simplification of bureaucratic procedures.

One of the key features of Diia.City is the reduction of the tax burden for residents. This includes reductions in personal income tax rates, as well as benefits for other types of taxes. In addition, the regime establishes special conditions for hiring workers, including the possibility of using gig contracts.

Diia.City offers a special tax regime for IT companies, which includes:

• Reduction of personal income tax (personal income tax): Diya.City residents pay a reduced personal income tax of 5% (standard rate – 18%).
• Single social contribution (SSC): Special SSC rates are provided for employees of resident companies.
• Corporation tax: Certain exemptions or exemptions from corporation tax for qualifying companies, namely 9% on "capital withdrawn". This means that Diya City residents will not pay income tax at all. How to submit relevant reports. And the tax on withdrawn capital applies only to transactions related to the withdrawal of money from the company.

Certain criteria are established for Diya.City resident status. For example, a company must have at least 9 employees with an average monthly salary of at least 1,200 euros. To enter, you need to have a business in the technological field: computer programming, IT consulting, computer equipment management activities, publishing computer games and other programs, providing software products in the "online" mode, educational activities in the field IT, cyber security, fintech product development and launch, design and more. The amount of qualified income of a legal entity for the first 3 months must be at least 90 percent. There are also special conditions for startups, which provide for less stringent requirements for the number of personnel and revenues.

But during the period of martial law, these criteria were significantly weakened:

If the number of employees, average salary, etc. do not meet the criteria, current residents will not be deprived of the special regime status, and companies that seek to join the Diya City residency will also be accepted.
Residents will not be required to submit a compliance report and independent audit report until January 1 of the year following the peace year.
The tax conditions of Diia City remain unchanged.
To acquire the status of a resident of Diya.City, the company must meet the following criteria: Minimum number of employees, average salary, etc. and submit an application for registration as a resident.

The resident company itself chooses the hiring format and, in addition to the typical forms of joint venture or cooperation with the FOP, can sign a GIG contract available only to Diia.City residents

It is difficult to overestimate the importance of Diia.City for the economy of Ukraine. Thanks to this regime, the IT sector has the potential to become one of the key drivers of the country's economic growth. This is already confirmed by the attraction of significant tax revenues from residents of this special regime.

Despite the advantages, there are also potential negative aspects:

1. Bureaucracy and difficulties in registration: Potential difficulties in the process of registration and compliance with criteria.
2. Restrictions for some activities: Not all IT companies can become residents due to specific requirements.
   Changes in legislation: The risk of changes in conditions or legislation that may affect the stability and predictability of business conditions.
3. These aspects are important for understanding the comprehensive impact of Diya.City on the IT industry of Ukraine, as well as for assessing the potential challenges that resident companies may face.

Today, Diia.City continues to develop, attracting new IT companies and contributing to the innovative development of the Ukrainian economy. The Diia.City tax regime launched before the war has about 700 resident companies that paid UAH 6 billion in tax for the three quarters of 2023.

Thus, Diia.City opens up new opportunities for the development of the IT sector in Ukraine, offering favorable tax and legal conditions. However, potential participants should carefully evaluate all possible negative aspects and make an informed decision about whether to become a resident of Diia.City.

You can register a company and acquire the status of a Diia.City resident together with the Olson Company.