An innovation of 2021 in the IT sector was the adoption of the Law of Ukraine “On Stimulating the Development of the Digital Economy”, which launched a unique legal framework — Diia.City. Its main goal is to create a comfortable environment for the development of IT business in Ukraine: from programming to game development, tech consulting, and other digital services.
Several years have passed since then, and we can see: the topic still raises many questions. In this article, we not only explain what it is but also share our experience and answers to the most frequently asked questions from entrepreneurs. In short — yes, Diia.City is still functioning, and yes, it may be beneficial in 2025. But let’s take it step by step.
Taxation for companies in Diia.City: what to choose in 2025?
First of all, two important things:
- The Diia.City regime is voluntary. You are not obliged to join if you don’t see the benefit.
- If you do join, you get to choose — the classic corporate income tax (18%) or the distributed profit tax (9%).
- If you regularly pay dividends, it’s more profitable for the investor to choose the distributed profit tax (DPT) — 9%.
- If your company reinvests profits — DPT allows you to completely avoid taxation on those funds.
You can choose the DPT by submitting an application to the controlling authority — no later than 15 days before the start of a new quarter.
If you do not submit the application, the default 18% rate will automatically apply.
What is the distributed profit tax?
This is a tax paid only when the company “distributes” profits out of the business — for example, when paying dividends, interest, royalties, aid, etc. If the funds remain in circulation — no tax is applied.
- Payment of income from joint activities to Diia.City residents who are not subject to DPT
- Payment of dividends
- Payment of royalties
- Transactions involving the free transfer of assets, services, or financial aid to non-residents of the regime
- Payment of interest, commissions, compensations, penalties, fines for attracting funds
For example, if an investor does not withdraw dividends but reinvests them into the Ukrainian business — no tax will be applied.
Who can вecome a Diia.City Resident?
To become a participant in the Diia.City regime, it takes more than just the desire — you must meet the legal requirements.
- The company must engage in one of the permitted activities defined by the Law (software development, IT consulting, game development, EdTech, etc.).
- It must have at least 9 employees or gig contractors, each receiving no less than €1,200 per month.
- Qualified income (i.e. income from IT activities) must make up at least 90% of the company’s total revenue.
- The company must not have any negative conditions that would block entry (e.g., bankruptcy, liquidation, sanctions, or non-profit status).
What If I’m a Startup and Don’t Have 9 People Yet?
The law provides for a “transitional” status for startups — with relaxed entry requirements. There is also a separate category for R&D companies (Research & Development) engaged in developing or improving technologies, which may enter Diia.City under simplified conditions.
