Ukraine votes YES on Diia City – The World’s First Virtual City

Originally written by Olga Karpenko (in Ukrainian) AIN.ua

On April 15, 2021, members of the Ukrainian parliament voted yes on the draft bill that aims to stimulate the digital transformation of Ukraine’s economy. This bill lays down the foundation for a special legal framework for the IT industry and has been a hot topic for discussion in the IT community.

Diia City’s main goal is to stimulate the development of the digital economy in Ukraine by creating a special framework that will last at least 15 years.

What Diia City offers

1. Companies can apply for Diia City “Residency” voluntarily, and if their application is accepted, they’re added to the Diia City registry.
2. The concept of gig workers and gig contracts
   1. A resident of Diia City can sign an agreement with a gig-worker specifying the latter’s work responsibilities. This work can consist of tasks, projects (gigs), or any other work agreed to between the employer and gig worker. The employer has to pay for the gig worker’s work and provide proper working conditions if the work is not performed remotely.
3. A special taxation model for Diia City residents of 5% personal income tax, single social security tax at 22% of minimum pay, a choice of 18% corporate income tax or 9% distributed profit tax and a 1.5% military tax

The first version of the Diia City bill was highly criticized for how risky it makes it for companies to work with contractors and how much power it gives to the Ministry of Digital Transformation.

The second, updated version of the bill was finished in March 2021 and was better received than the first. However, many outspoken community members still have unanswered questions, specifically about the non-solicitation and non-compete clauses.

What’s next?

The next step is voting on the taxation model, outlined in a separate bill. Regarding the controversy with the non-solicitation and non-compete clauses, the Ministry of Digital Transformation promises to make changes to the bill before it is voted on again during the second reading.

Why this is important

Diia City will become the launchpad for creating a special legal framework for Ukraine’s IT industry.

From Bridge: We previously covered Diia City in our article on the 4 Reasons Why Your Next Remote Development Team Should be Based in Ukraine (in the Government Incentives section). For additional information, check out the Diia City Presentation.