Ukraine’s government has launched one of the most promising reforms to create a global IT hub in Ukraine. The project, called Diia City, provides for special digital residency with a particular taxation regime, intellectual property protection and simplified regulations.
Ukrainian leadership intends to establish a comprehensive, liberal legal framework for the IT industry. President Volodymyr Zelenskyy urged the Cabinet of Ministers of Ukraine to design the legislation for Diia City – the world’s first virtual business country for the creative economy. Diia City implies a step change in current taxation, enforcement and judicial systems.
“The government and IT sector are now working together. We are drafting legislation to support the IT industry. And we assured the IT sector of sustained governmental support; for them, there would be no taxes above 5%. Cause we see Ukraine as a European intellectual hub for the most talented specialists,” said Zelenskyy during an IT conference in Lviv on September 17.
Diia City’s implementation is conducted by The Ministry of Digital Transformation of Ukraine. The reform provides for replacing corporate tax by dividends taxation at a 10% rate. The tax model for employees implies a 5% personal income tax rate. Diia City management and governance is assumed by Diia City residents themselves.
“Diia City – a virtual digital country with no limits for new investments, jobs and cutting-edge technological development. This is a place where the state regulation is minimal and which will thrive with the creation of innovative products and multinational companies of any size, where Ukrainian and foreign entrepreneurs have the opportunity to bring to life the most ambitious and innovative business ideas,” says Alexander Bornyakov, deputy minister of digital transformation of Ukraine.
Development and law adoption in Diia City, as well as the adaptation of tax and labor legislation amendments, are scheduled to be completed by the end of December 2020.