Law of Ukraine as of 14.12.2021 № 1946-IX “On amendments to the Tax Code of Ukraine to stimulate development of digital economy in Ukraine” comes into force from 01.01.2022.
Law provides for the introduction of a number of measures to stimulate development of the IT industry, particularly special taxation regime for residents of “Diia” City – IT companies that meet requirements of the Law of Ukraine “On stimulating development of digital economy in Ukraine” and will be included in a special register managed by the Ministry of Digital Transformation of Ukraine.
Resident of “Diia” City is a taxpayer who meets all of the following requirements:
1) carries out one of activities (computer programming, consulting on informatization, computer equipment management activities, publishing computer games and other programs, providing software products online, educational activities in the IT sphere, cybersecurity, etc.);
2) amount of monthly remuneration for specialists is not less than 1,200 euros;
3) number of gig specialists is not less than 9;
4) amount of legal entity’s qualified income for the first 3 months is not less than 90 percent.
Supervisory authorities provide the Ministry of Digital Transformation of Ukraine with information necessary to determine the legal entity’s compliance with requirements of the Law of Ukraine “On stimulating development of digital economy in Ukraine” regarding:
- amount of wages;
- legal entity’s average number of employees and gig specialists;
- amount of tax debt;
- regarding legal entity’s inclusion in register of non-profit enterprises, institutions, organizations.
Transition to application of a special taxation regime of “Diia” City residents is carried out on an applicant basis.
Value Added Tax
Special taxation regime of “Diia” City residents provides for the possibility of their transition to corporate income tax under special conditions (similar to the withheld capital tax), which provides for the 9% tax rate and taxation of only a number of operations, such as:
dividend payments;
interest payments to non-resident related parties or non-residents registered in the “low-tax” jurisdictions;
provision of financial assistance to “Diia” City non-resident – payer on a special regime that is not subject to return or to a related individual or a related person – non-resident, regardless of the return condition or to unrelated person who remains unreturned for 12 calendar months;
gratuitous provision of property to a non-resident of “Diia” City – payer on a special regime;
payments made in connection with investments in investment objects (including acquisition of property) located outside the territory of Ukraine,
acquisition of property, works, services from non-resident taxpayer and / or transfer of property, works, services to non-resident taxpayer (if calculations or supply of property, works, services for relevant operations are not made within 360 days or otherwise according to law);
payment of royalties in excess of the limit and in other individual cases.
In this case, a separate tax base in the special taxation regime for “Diia” City residents will be amount of non-compliance of controlled operation with principle of an “outstretched hand”, which will be taxed at the 18% rate.
Reporting period for the special taxation regime for Diia” City residents is a calendar year.
Personal income tax
Peculiarities of personal income taxation of specialists of “Diia” City resident are established. The 5% rate is applicable to:
a) wages;
b) rewards under the gig contract;
c) royalties for creation of an official work and transfer of rights to official works.
Reduced rate is applicable under condition that amount of such income for a year does not exceed the equivalent of 240 thousand euros. From the excess amount, payer pays tax at the 18% rate and submits annual tax declaration.
If “Diia” City resident loses the status (by court decision or non-compliance with criteria) for such a period, he / she must independently transfer and pay at own expense tax at the 18% rate to the budget.
The following is exempted from the personal income taxation:
contributions paid by the resident employer at own expense under the non-state pension provision of taxpayer and / or under voluntary health insurance agreements within 30% of the accrued salary to such employee;
contributions paid by “Diia” City resident at own expense under the non-state pension contracts and / or voluntary health insurance contracts of taxpayer – gig specialist within 30% of the accrued remuneration to such gig specialist;
dividends accrued by issuer of corporate rights who is a resident of “Diia” City – taxpayer on special conditions, provided that such resident of “Diia” City is a taxpayer on special conditions has not paid dividends on shares or other corporate rights for two consecutive calendar years.
Tax rebate:
Expenses for tax rebate may include amount of taxpayer’s expenses for acquisition of shares (other corporate rights) issued by the legal entity that has acquired status of “Diia” City resident, provided that such expenses were incurred by taxpayer before the issuer acquires status of “Diia” City resident or during a period when such “Diia” City resident meets the requirements.
In the case of such expenses, the total amount of tax rebate is limited not only by amount of received wages but also amount of received dividends (except for dividends that are not taxed).
Single contribution to obligatory state social insurance
Single contribution for payer – resident of “Diia” City is set:
a) in the amount of wages accrued to each insured person in amount of the minimum insurance premium (22% of the minimum wage);
b) in the amount of remuneration to individuals for performance of works (provision of services) under gig contracts in amount of the minimum insurance premium (22% of the minimum wage).
Individuals – entrepreneurs who have main place of work or have entered into a gig contract with a “Diia” City resident are exempted from paying single contribution for months of the reporting period for which employer (resident of “Diia” City) paid insurance premium for such persons in the amount not less than the minimum insurance premium (22% of the minimum wage).