Tax & Legal support for Diia City residents
The Diia City concept was initially introduced as a beneficial tax and legal regime aimed at fostering the growth of Ukraine’s digital economy and scaling up foreign investments to position Ukraine a leading IT hub in Europe.
More than 70% of Ukrainian IT companies have become residents of Diia City, representing over 1,700 companies that employ more than 104,000 people. In 2024m the Diia City members paid over $402 million taxes. IAs of now, over 300 defence companies are the Diia City residents.
Eligible activities for Diia City residents include, among others, Cybersecurity, Development of technological products in the defence sector; Design, production, maintenance, repair of unmanned aircraft systems and their components, as well as drone operation training.
Key benefits of the Diia City regime:
- Guarantees for Diia City residents include, in particular: validity of this legal regime for no less than 25 years, stability of taxation terms, presumption of the legality of a resident’s activities, protection from excessive interference by state bodies, and more.
- Tax benefits envisaged, including:
- Reduced payroll taxation burden (5% rate of Personal income tax instead of standard 18% rate, Unified social contribution is calculated from a minimal salary)
- Personal income tax exemption for dividends (if paid not more than once every 2 years).
- Personal income tax rebound for investments in start-ups
- Possibility to reserve personnel from military service
- Possibility to choose between the standard corporate income tax (18% from net profit before tax adjusted for tax differences) or an Exit capital tax (9% to the specific types of operations (e.g., dividends, free of charge supplies))
- Flexibility in engaging people under various models (employment contracts, gig-contracts, service contracts with private entrepreneurs)
- Available options for engaging non-Ukrainian citizens without the need for work permits during the period of martial law in Ukraine
- No hidden employment risk and related tax risks under the gig-contract model
- Non-Disclosure Agreements (NDAs) and Non-Compete Agreements (NCAs) may be used without risk of violating labour rights.
How to fully benefit from Diia City regime?
Assess eligibility for becoming a Diia City resident: Generally, Ukrainian companies that operate within specified IT or innovation sectors, have at least 9 employees or gig specialists, maintain an average monthly salary of at least EUR 1,200 and derive at least 90% of their income from qualified activities may be eligible for Diia City framework. Startups have slightly different requirements, with a lower revenue threshold.
Perform a comparative analysis of the tax implications of using alternative tax regimes available to Diia City residents (e.g. Diia City with corporate income tax, Diia City with exit capital tax, the general taxation regime, or other applicable regimes) - to determine the most beneficial option.
Perform a comparative analysis of the most beneficial workforce engagement model: employment contracts, gig-contracts, or B2B service contracts.
Solutions offered by PwC Ukraine
PwC’s team brings together in-depth knowledge of the complex Ukrainian tax and regulatory framework, with a focus on the needs of IT and Defence businesses. We offer practical, tailored strategies to help you achieve the best outcomes from local developments while remaining aligned with international standards.
Assessment of eligibility and development of a roadmap to establish a business in Ukraine and become a Diia City resident
Assistance with Diia City registration
Illustrative calculation of tax implications for your business model as a potential Diia City resident
Legal support with structuring of relations with the workforce
Advice on strengthening the protection of IP rights, trade secrets and confidential information through the development and/or review of the draft documents (including, gig-contracts, employment contracts, service agreements, NDAs, NCAs
Design of transfer pricing models, support with related compliance and benchmarking studies
Consulting on reduced payroll taxes applicable to remuneration, bonuses and compensations paid to gig-contractors and employees
Preparation or review of the draft tax returns
Support with the engagement of non-Ukrainian citizens
Contact us
Oleksiy Katasonov
Partner, Tax, Legal & People Leader, Leader of Defence practice, PwC in Ukraine
Tel: +380 44 354 0404
Maksym Dudnyk
Partner, Tax Consulting and M&A, Transformation Leader, PwC in Ukraine
Tel: +380 44 354 0404
Director, Market Entry & Exit, Employment & Immigration Leader, PwC in Ukraine
Tel: +380 44 354 0404
Anna Nevmerzhytska
Director, Financial Services & International Tax Solutions Leader, PwC in Ukraine
Tel: +380 44 354 0404
