“The launch of Diia City will allow Ukraine to become the largest IT hub in Europe” - President Volodymyr Zelenskyy, President of Ukraine.
During his speech at the third Diia Summit in Kyiv, the President announced the Launch of the Diia City space; one of the best tax and legal regimes on the planet. Here, the language of venture capital investment is the standard de facto.
Every growing Ukrainian business wants to pay less tax, enjoy a flexible employment structure and attract foreign investors. Gifts like these could be game-changing for any business. That is exactly what Diia City offers - the most conducive and favorable environment for the growth of Ukrainian businesses in the IT sector.
Ukraine is becoming a country of IT companies and startups. According to the President, Diia City will increase the share of IT in Ukraine’s GDP from 4% to 10%, and the industry's revenues will grow up to $ 16.5 billion. This will make Ukraine the largest IT hub in Europe.
What is Diia City?
Diia City is a special tax and legal regime that provides a healthy space for the proliferation of IT businesses in Ukraine. Businesses in Diia City will enjoy unique legal and tax conditions that will significantly reduce the costs of managing and operating an IT business; while making life for entrepreneurs a lot easier.
In Diia City, you’ll be able to run your business with convenience, openness and profitability. This space is a blessing because it allows companies to build a transparent corporate structure, and attract foreign investment with a lot more ease. The city also provides mechanisms to help companies protect intangible assets such as IPs.
How Diia City works is pretty simple but complex. Entry into the space is free and voluntary. The regime will operate from any region of the country, and will exist for at least the next 25 years.
Benefits of being a Diia.City resident
Among other benefits, businesses in the space will enjoy the non-interference of the state, and the freedom of activity/cooperate structure.
Here are more glaring benefits of the Diia City regime, with more clarity.
Low Tax Rates
- The regime offers an 18% income tax and a 9% exit capital tax for businesses.
- As for labor taxes, Diia City offers personal income tax at 5%, Social Security fee is at 22% of the minimum wage, and 1.5% military tax.
Flexible with the employment model
The Diia City regime lets you choose the employment model that suits you as a business. Companies in the space will be free to pick hiring methods that work best for them. The regime allows these businesses to hire talent as contractors, also known as individual entrepreneurs in Ukraine, or as “GIG workers” - a special kind of workforce only available under the Diia City space.
Diia City goes far enough to create a new kind of employment classification, called “GIG contracts”. Such contracts are a new alternative to standard forms of employment that combine the main advantages of typical contracts.
These advantages include; Showing real turnover and paying moderate taxes, assuring basic social guarantees for specialists, and a simple administration process.
Notwithstanding, the regular employment models in other parts of the world still apply in Diia City. Models such as contracts with freelancer/self entrepreneurs, or employment contrasts under the National labor code.
Venture investment tools
Looking for venture capital investments? Raising cash from venture Capital doesn’t get any easier, thanks to Diia City. The regime is built with elements of English Common law that facilitate access to investment.
Elements include; convertible loans, liquidation preferences, Liquidated damages, warranties and indemnities, and Option and ESOP ( the right for investors to increase their investment in the authorized capital of a company in case of growth).
The Diia City space also offers investment promotion tools such as; 0% tax on the dividends paid to investors by a resident company, provided that they are paid no more than once in 2 years term.
Guaranteed IP protection
In Diia City, intellectual property is priority. The space guarantees the protection of intellectual properties such as computer applications, algorithms, databases, etc.
Smooth Managing of businesses on the Web
Running an online IT business? It’s super easy to move and manage your business online in the Diia City space. All you have to do is complete your application online and then wait for a maximum 10-working day application review.
NB: No permits or licenses are required.
Both, Ukrainian-owned and Foreign-owned companies registered under Ukrainian legislation can apply to own online businesses in Diia.City.
How to become a Diia.City resident
Becoming a Diia City resident is one of the best decisions you can make for your business, especially if you’re in Ukraine. Here’s what you need to enter the city of business:
Eligible business activities
The focus of the space is on IT businesses, including;
- Software and Game Development.
- Software publishing and distribution, SaaS in particular.
- eSports
- Training in computer literacy, programming, testing, and technical support of software
- Cybersecurity
- Telecommunications
- Digital marketing
- Supply of services related to the circulation of virtual assets (Cryptocurrency, NFTs, etc.)
- Robotics
Entry conditions for operating companies
- Residents must have at least 9 employees or GIG contractors, with an average salary equivalent to €1,200.
- 90% of the company’s income should be from business activities.
Entry conditions for startups
- For startups, annual income should not exceed 7,5 million UAH.
- 90% of the startup’s income should be from business activities.
- Startups should be at least two years old.
What do you need to register?
Here are the documents you need to prepare in advance to help you fill out the forms:
- Digital signature.
- Power of Attorney, if you’re applying on behalf of someone else.
Applications are submitted through the Diia.city official website.
Conclusion
Diia City offers significantly better tax conditions to it’s residents, compared to other special frameworks in different countries around the world. This special regime through it’s investment tools and tax policies will make Ukraine a powerful IT hub.
The number of innovative projects will skyrocket, IT businesses will become more profitable and very juicy for foreign investment.
Join the number IT space in Europe today!