Residence in Diia City: 6 important tips for IT business
In the summer of 2021, the IT business was shaken by important news: the Law "On Stimulating the Development of the Digital Economy in Ukraine" came into force, which introduced the first stage of the long-awaited legal regime "Diya City"
For the full-fledged operation of the regime, the Verkhovna Rada of Ukraine adopted the Law "On Amending the Tax Code of Ukraine and Other Laws of Ukraine on Stimulating the Development of the Digital Economy in Ukraine", which established the peculiarities of taxation for Diya City residents
So how the best Ukrainian IT specialists can prepare for the new realities of running an IT business - said Maksym Kurochko, managing partner of MK Legal Service.
Check if you meet the criteria for residency
To choose the Diia City regime, your business must meet the following requirements:
— have a type of activity in the IT field according to the list established by the Law;
— establish an average monthly gross remuneration of at least the equivalent of EUR 1,200 for all employees of the company;
— have at least 9 employees;
— receive at least 90% of income from IT activities from the total income
— have no negative circumstances regarding the status of the business, beneficiaries or debts.
Be responsible for the documentation
In order to confirm compliance with the criteria for obtaining the status of a Diya City resident, in addition to the application, you must provide the authorized body with the following documents:
— a report on compliance with the requirements, including information on areas of activity, company revenues, number of employees and average salary;
— an independent audit report confirming the data specified in the report.
Learn the nuances of the new tax regime
The Diya City regime provides for the possibility of self-selection of a new taxation system by the Diya City resident.
Here are her main rates:
— 9% — income tax rate only on a certain tax base (tax on withdrawn capital);
— 5% — for taxation of salaries and remuneration of employees and gig specialists;
— minimum unified social contribution rate — for employees of Diya City residents;
— 22% of the unified social tax base - for gig-specialists.
Check if the Diia City regime is right for you
Given the conditions of taxation and conducting business, the Diia City regime will be attractive for two types of businesses:
— IT companies with foreign capital that have large payments abroad to the parent company or investors.
— large retailers, financial and insurance companies and banks that have a separate IT department or a large staff of IT employees, employed under employment contracts with "white" salaries — provided that this staff or department of employees is transferred to a separate company.
Choose a status for your company's specialists
The law provides three alternative options for the registration of specialists, who are involved in their activities by residents of Diia City:
— employee (under an employment contract or contract);
— individual or sole proprietor (under civil or business contracts for the provision of services);
— gig specialist (under a gig contract).
In addition to the usual first two formats of cooperation, the Law adds a new type — a gig contract, which allows you to formalize real relationships in the IT field. This form of contract will give IT specialists more freedom as under a civil law contract, but will add the advantages of an employment contract in terms of social security
Protect your business from abuse
The law also introduces new types of contracts that will protect the interests of Diia City residents from possible violations by employees or competitors.
The official status in the legislation of Ukraine has been given to:
— non-disclosure agreement, which will protect against the transfer of confidential or commercial information by an employee;
— non-competitive agreement which will prevent the former employee from getting a job or starting his own business in similar types of IT activities.
In case of violation of these contracts, employees are entitled to financial compensation