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IT business and Diia City

On 8 February 2022, the Ukrainian government officially launched the new legal and tax regime for IT companies - #DiiaCity.

NOBLES experts prepared an overview of the Diia City framework, including its qualification criteria, conditions, legal mechanisms and tax incentives.


The Law of Ukraine “On Stimulating the Development of the Digital Economy in Ukraine” No. 1667-IX dated 15 July 2021 (the “Diia City Law”) offers eligible Ukrainian companies engaged in the IT area a special legal framework (regime) establishing favourable conditions, mechanisms and tax incentives for operating their businesses (the “Diia City Regime”). The ultimate goal pursued by the new Law is to stimulate the development of the digital economy in Ukraine through setting up innovative businesses, building a digital infrastructure, attracting investment and skilled specialists.

The principle of stability enshrined in the Diia City Law shall ensure that the special guarantees and benefits provided thereby remain in force and unaffected for at least 25 years from the registration of the first Diia City resident. Such expectations of stability might be viewed as too optimistic considering the unstable political landscape and current weak economic positions of the country.


Residency in Diia City and enjoyment of the advantages provided thereby is voluntary. Only companies incorporated and registered in Ukraine that meet the following criteria can apply for and become a Diia City resident:

1. Existing companies

  1. The company must carry out one or several types of activities in the IT area as listed in the Diia City Law and/or a resolution to be approved by the Cabinet of Ministers of Ukraine. The eligible activities include, in particular:

  • software development and testing;

  • publishing and distribution of software;

  • software maintenance and technical support;

  • digital marketing and ads;

  • R&D in IT and telecom;

  • services related to the virtual assets flow;

  • cybersecurity, etc.

2. Qualified income (generated exclusively from the above IT activities) must constitute least 90% of the company’s general income in each year of being a Diia City resident.

3. The company must engage, on average, not less than nine specialists (either employees or gig-specialists) in each calendar month of being a Diia City resident.

4. The average monthly remuneration of engaged employees and/or gig-specialists shall be no less than an equivalent of EUR 1,200.

5. The company does not fall under any exclusions, such as:

  • 25% or more of its shares (directly or indirectly) belong to the state or municipal community or a legal entity listed by FATF as a country not cooperating in the prevention of money laundering;

  • It is (directly or indirectly) controlled by an aggressor-state (currently, Russia) or a company incorporated, or an individual residing in such state;

  • It has failed to disclose its ultimate beneficiaries and/or shareholding structure;

  • It is subject to (national or international) sanctions or is related to a person being under sanctions;

  • It is recognized bankrupt or is being in the process of winding up;

During any 30 consecutive days, it has a tax debt of more than ten minimum statutory wages (currently, UAH 65,000).

2. New companies (start-ups)

As an exception, start-ups, i.e., companies incorporated not earlier than 24 months before applying for Diia City residence, are allowed not to comply with criteria (3) regarding the number of engaged specialists and (4) regarding the average monthly remuneration. Such a company can become a Diia City resident provided that

  1. It complies with the rest of the above criteria (i.e., criteria (1), (2), and (5);

  2. Its annual income does not exceed 1,167 minimum statutory wages (currently, UAH 7,585,500) in the year preceding the application, the year of applying and becoming a Diia City resident, and in the immediately following year.

However, a start-up company shall ensure its compliance with the two remaining criteria by the end of the year following the year in which it became a Diia-City resident. Otherwise, it will forfeit its residency status and respective privileges.


1. Special (preferential) taxation framework

  1. Diia City residents can choose between the general taxation system and pay the regular corporate profit tax (CPT) at the rate of 18% or the special taxation regime under which they will pay distributed profit tax (DPT) at the rate of 9%.

  2. The Diia City Law provides for detailed rules regarding DPT defining the taxable object (instead of the regular profit calculated in accordance with accounting standards as income minus expenses adjusted to applicable tax differences, subject to DPT will be certain amounts paid out / distributed by a Diia City resident, such as dividends, royalty, interest, etc.), exemptions, reporting, etc.

  3. Dividends paid out by a Diia City resident to individuals will be exempt from taxation, provided that they are paid out with an interval of no less than two calendar years. There will also be (under certain conditions) a tax rebate for individuals who acquire a stake in a start-up - resident of Diia City.

  4. Taxation of employees and gig-specialists: Preferential tax rates apply to salaries (income) of employees and gig-specialists of Diia City residents: 5% personal income tax (PIT) (instead of the regular rate of 18%) and 1.5% war tax. The mentioned preferential PIT rate is applicable only to an annual income of up to EUR 240,000 (in equivalent). Exceeding amounts are subject to the general PIT rate of 18%, which the employees / gig-specialists shall declare and pay themselves.

  5. Diia City residents pay unified social tax (22%) in the minimum amount for each employee and gig-specialist. I.e., the taxable remuneration amount is capped by the minimum statutory wage, which is currently UAH 6,500, regardless of the actual remuneration amount.

  6. Starting 2024, the deductibility of expenses of Diia City residents who choose to remain in the general taxation system for purchases of goods or services from payers of the so-called unified tax (subject to simplified taxation, such as private entrepreneurs) will be limited to 20% of such residents’ general (operational, financial, investment) expenses.

2. Flexible employment conditions of specialists

A Diia City resident can choose the format of engagement of specialists that suits it best: a gig-contract, a standard employment agreement or an employment contract under the Labour Code, or engage specialists as individual entrepreneurs (FOP).

2.1 Gig-contracts

The Diia City Law introduces the concept of gig-contracts and gig-specialists, which is a new form of talent engagement alternative to formal employment and engagement of private entrepreneurs. Gig-contracts are civil law agreements for the provision of services or performance of works (including in a certain employment-like position) that a Diia City resident can enter into with an individual contractor instead of an employment agreement or a (services) contract with a private entrepreneur. Under a gig-contract, the parties can flexibly govern their relations, including:

  1. The mode, place, time and other peculiarities of work performance / services provision;

  2. Remuneration, which can be determined in UAH or in foreign currency;

  3. Assignment of IP rights to IP objects created by a gig-specialist (by default, economic IP rights in such objects are deemed to belong to the Diia City resident immediately after creation);

  4. Term, grounds for termination, etc.

It should be noted that basic labour and social law guarantees and standards, such as the limitation of working time duration, time for rest, vacation, social welfare benefits (including under public temporary disability insurance), etc. apply to gig-specialists in a similar way as they do to regular employees. A gig-contract is also a basis to apply for a temporary residence permit for a foreign gig-specialist engaged by a Diia City resident (a work permit is not required but can be obtained voluntarily).

2.2 Employment contracts

A Diia City resident can also choose to engage its employees under standard employment agreements. However, the Diia City Law permits, instead of standard employment agreements, to enter into employment contracts with all employees that are in the employment of a Diia City resident.

In contrast to an employment agreement, whose contents are largely pre-determined by mandatory labour law provisions, parties of an employment contract can flexibly regulate their rights, duties, liability, organisation and remuneration of work, termination grounds as well as other employment conditions. Previously, employment contract was available only for certain employee categories, such as CEOs.

2.3 Non-disclosure and non-competition agreements

A major breakthrough of the Diia City Law are explicit provisions on non-disclosure and non-competition agreements that a Diia City resident can enter into with its employees and gig-specialists. These instruments were previously viewed problematic or non-enforceable under Ukrainian labour law. From now on, they will become available to Diia City residents. E.g., a post-contractual non-competition agreement can be concluded for 12 months.

3. Other advantages

Other noteworthy advantages and benefits of the Diia City Regime are:

  • Convertible loans, under which a creditor of a Diia City resident can convert its claims into a share in such resident’s charter capital.

  • Options for the purchase of shares in a Diia City resident’s capital (under a condition precedent).

  • Liquidation preferences (for both normal liquidation and bankruptcy) that can be agreed unanimously by all shareholders of a Diia City resident.

  • Preferences for particular creditors that can be granted by a resolution of the shareholders’ meeting of a Diia City resident.

  • Warranties, representations & indemnities (compensations, liquidated damages) that can be provided for in agreements with Diia City residents and in agreements pertaining to a share in a Diia City resident’s capital.

  • Functions of the executive body of a Diia City resident which is an LLC can be performed by another legal entity.

  • Planned measures of control conducted by controlling authorities with respect to a Diia City resident require consent from the head of the respective authority.

  • Simple and speedy registration: The eligible applicant has to file only an application form together with written assurances of compliance with the statutory eligibility criteria. Processing takes ten business days; the applicant is then registered in the Diia City Register (

  • Simple compliance: Diia City residents shall file annual reports on their compliance with Diia City residency criteria confirmed by an independent auditing company.


Since the Diia City Regime is an unprecedented and substantial business innovation in Ukraine, its success perspectives and intended benefits for the country’s economy as a whole and the IT industry in particular remain subject to hot debate. As the Diia City Register became operative as of February 8, 2022, so far no practical experience with the Diia City Law have been gathered. Nevertheless, Ukrainian government positively encourages eligible companies to apply for Diia City residency.

Download PDF here.

This publication should not be construed as legal advice or legal opinion on any facts or circumstances. If you have any questions or require specific advice on any matter discussed in the Legal Overview, please contact our colleagues above.

Volodymyr Yakubovskyy (Partner), Denys Vergeles (Counsel), Vasyl Fedorenko (Senior Associate).



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