Diia.City - the name sounds interesting, yet for many entrepreneurs, it still feels like a mystery.

Some call it the “offshores of Kyiv”, while others refer to it as a “trap for IT businesses”. But what is it really? The answer is both simpler and more serious.

Diia.City is a special legal framework introduced by law for technology businesses in Ukraine.

Its goal is straightforward and pragmatic: to provide the IT industry with clear rules, competitive taxes, and modern cooperation formats with professionals - so that companies can grow in Ukraine rather than look for “tax oxygen” abroad. Importantly, your organizational form (LLC, JSC, etc.) does not change; instead, you gain the legal status of a Diia.City resident and benefit from its tools. The legal foundations of this regime are set out in the Law of Ukraine “On Stimulating the Development of the Digital Economy in Ukraine” (commonly known as the Diia.City Law), while taxation rules are codified in the Tax Code.

Diia.City is designed for entities that genuinely create digital products, provide IT services, engage in R&D, develop new technologies, work in EdTech, cybersecurity, game development, and a range of other qualified activities defined by law.

After acquiring the status of a Diia.City resident, among other things, the company must comply with three fundamental requirements:

• derive at least 90% of its income from qualified types of activities,
• maintain an average number of employees and/or gig specialists of no fewer than nine,
• and ensure that their average monthly remuneration is not less than the equivalent of EUR 1,200.

These are important aspects that must be observed, since the very sector requires a transparent business model and does not tolerate imitation.

When working with professionals, a Diia.City resident can engage them either under labor contracts or gig contracts. The latter has sparked the most debate. A gig contract is not a classic employment agreement, nor is it a token civil contract. It does not turn a person into a “different kind of sole proprietor.” Instead, it is a legally regulated format of cooperation that allows residents to flexibly engage specialists. Most importantly, it significantly reduces the tax authority’s grounds to accuse businesses of “hidden employment.”

The main feature of the regime is the reduced Personal Income Tax (PIT) of 5% applied to salaries and gig specialist remuneration paid by residents. Social security contributions are fixed - 22% of the minimum wage, regardless of the actual remuneration of a specific specialist. The military levy applies under the general rules for individuals, which from 2025 amounts to 5%. Together, this substantially lowers the tax burden on payroll, resulting in tangible savings, transparent “white” payments, and better cash flow management for companies.

However, residency is not just about tax benefits. It also comes with higher standards of transparency and risk management. The law requires residents to submit reports, maintain no tax arrears, comply with activity and remuneration requirements, and properly document the transfer of intellectual property rights. Instead of constantly “re-signing contracts with sole proprietors” and worrying about reclassification of relationships as employment, businesses now have a legal contractual tool to clearly regulate relations between employer and specialist.

For product or service IT companies with “white” operations, competitive salaries at the level of mid-level professionals, and scalable business models, Diia.City almost always delivers a noticeable financial and operational effect. This shows up within the first months, through reduced payroll tax burden and lower legal risks in HR relations and IP rights. However, if your revenue mix includes a significant share of non-qualified activities, if salaries fall below the €1,200 threshold, or if your company cannot reliably sustain a team of nine or more specialists, then you need to model the consequences honestly. The regime tolerates temporary dips, but material breaches will trigger taxation under the general rules, negating the benefits.

As of today, Diia.City residency is less of a “future option” and more of a working standard for serious tech businesses in Ukraine. The decision to join should be based on financial modeling and legal due diligence of your processes, but if your business model already fits the regime, there’s little reason to postpone.

Diia.City is not a magic wand, nor a dangerous experiment. It is a tool. For some, it will be a real pathway to savings and scaling; for others, it may prove too demanding. But one thing is clear: if your company meets the criteria and aims to operate transparently, then in 2025, Diia.City residency is not an exotic choice - it is the modern standard.