We present a concise clarification regarding the taxation of personal income tax (PIT) and the unified social contribution (USC) for Diia City residents, as well as the procedure for paying PIT and USC in cases where the taxpayer does not meet the Diia City criteria. These matters have recently become the subject of numerous inquiries. We hope this information will provide practical insights and help avoid mistakes in light of the recent legislative changes.
It should be noted that the Diia City regime, established to stimulate the development of the IT industry in Ukraine, continues to evolve. As of early 2025, updated provisions on PIT and USC taxation for Diia City residents came into force, introduced in particular by the Law of Ukraine “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Stimulating the Development of the Digital Economy in Ukraine” dated 4 December 2024, No. 4113-IX.
One of the key features of these provisions is the application of a preferential PIT rate of 5% for specialists of Diia City residents. This rate applies from the calendar month following the month in which a company acquires Diia City resident status. Consequently, income accrued or paid to specialists in the month when the company acquires such status is taxed at the general PIT rate of 18%.
A similar approach applies to the USC, which is payable at the minimum insurance contribution rate. A Diia City resident begins paying the USC at the preferential rate starting from the calendar month following the acquisition of resident taxpayer status.
In summary, these updates do not abolish the Diia City preferential regime but rather specify the rules of its application, particularly during the initial period. This reflects the legislators’ intention to make the framework clearer and to prevent potential abuses or ambiguities. At the same time, companies planning to become Diia City residents—or those that already have this status—must carefully plan their registration dates and maintain precise accounting records to ensure the proper application of tax rates and avoid tax risks.
The legislative changes also clarify the taxation of PIT and USC for Diia City residents in cases of temporary or permanent non-compliance with the criteria established by the relevant legislation. Consequently, the responsibility of residents to comply with the preferential regime has significantly increased.
To apply the 5% PIT rate, a Diia City resident must meet the statutory requirements in the relevant month. Specifically, the average monthly remuneration for employees and gig specialists must be at least the equivalent of EUR 1,200, and the average number of such personnel must be at least nine. If a Diia City resident does not meet these requirements in a given month, the tax agent must independently calculate PIT at the 18% rate for income accrued (paid) to specialists in that month. The relevant amount must be paid by the tax agent prior to submitting the tax return, offset by any previously paid tax.
Special provisions are also established for startups registered as Diia City residents. Legal entities that do not meet all the requirements for resident status may retain this status until 31 December of the calendar year following the year of acquisition, provided they comply with part 3 of Article 5 of the Law of Ukraine “On Stimulating the Development of the Digital Economy in Ukraine” dated 15 July 2021, No. 1667-IX (regarding startups).
For such startups, the 5% PIT rate applies even in months when they do not meet the minimum headcount requirement (fewer than nine employees), up until the specified deadline. However, if after 31 December of the calendar year following the year of acquiring resident status the company continues not to meet this requirement, it must independently calculate and pay PIT at the 18% rate for income paid to specialists during the last three months of that year. This amount is payable by the tax agent, offset by any previously paid tax, and is not included in the specialists’ total monthly (annual) taxable income.
Similar rules apply to the USC. Diia City startups pay USC at the minimum contribution rate even in months when they do not meet the headcount requirement, up until 31 December of the following year. If, after that period, the resident still fails to comply, it must independently calculate and pay USC at the rate of 22% (or 8.41% for persons with disabilities) on income paid during each reporting period in which it was non-compliant, for the last three months of the following year. Importantly, the penalty of 10% on the additional contributions, provided for by Article 25 of the Law of Ukraine “On the Collection and Accounting of the Unified Contribution for Compulsory State Social Insurance” dated 8 July 2010, No. 2464-VI, does not apply. These provisions entered into force on 1 February 2025.
Overall, the strengthening of control over compliance with Diia City requirements has resulted in greater liability for taxpayers and increased financial risks in the event of non-compliance. This trend requires Diia City residents to constantly monitor their compliance, as well as to invest in effective internal control and accounting systems to promptly identify and address any deficiencies.
We trust that this information will be useful to you. Please note that the information provided herein is preliminary and does not cover all potential aspects and risks, which may be analyzed and presented in a separate, detailed consultation. Do not hesitate to contact us should you have any questions or require additional information or assistance.
Author: Dmytro Dovzhyk, Attorney and Partner at ArtesLex
08 August 2025
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