On 15 July 2021, the Ukrainian parliament passed the Draft Law No. 4303 “On Stimulating the Development of the Digital Economy in Ukraine” (the “Diia.City Law”) after a second reading.
The Diia.City Law establishes a specific legal regime for the IT-industry and is aimed at enhancement of the Ukrainian IT business sector.
The Diia.City Law provides general requirements for IT companies, which may become residents of the Diia City technology park and benefit from it. The law guarantees the protection of Diia City companies. Another long-awaited pillar of the Diia City regime is tax incentives, which will be implemented through a separate draft law that has yet to pass a second reading in parliament.
The main provisions introduced by Diia.City Law include:
- a gig-contract as a new contractual model for engagement of IT personnel by Diia City residents combining features of a classic employment agreement and a civil law service agreement;
- the possibility to conclude non-compete agreements with IT personnel and the requirements for these agreements (e.g. maximum duration, conditions of remuneration etc.);
- the possibility to engage another legal entity to perform the functions of the management body of a Diia City resident;
- additional guarantees for IT companies in relation to the protection of intellectual property rights.
Diia City’s benefits will be available only to entities specifically registered within Diia City (e.g. Diia City residents). Such residency is subject to compliance with a set of specific eligibility requirements, including register in Ukraine, conducting IT-related business activities, having at least nine employees or gig-contractors, and ensuring that the average monthly compensation of such employees or gig-contractors should be no less than EUR1,200 (in UAH equivalent).
The Diia City regime is expected to function for at least during 25 years from the date of registration of the first Diia City resident.
This note is based on the most recent text of the Diia.City Law that is currently available, which may differ from the final version. The Diia.City Law has yet to be promulgated by the President of Ukraine and will come into force after its official publication.
For further updates on implementation of the Diia City regime in Ukraine and guidance on becoming a Diia City resident, contact your regular CMS advisor or local CMS experts: Olga Belyakova or Maria Orlyk.
Source: Text of Draft Law of Ukraine On Stimulating the Development of the Digital Economy in Ukraine” No. 4303.