IT Companies Will Be Limited to Work with Private Entrepreneurs

by Anastasiia Lieberman
Monday, October 11, 2021

The "IT Ukraine Association" announced that amendments were made to one of the draft laws introducing the “Diia City” regime, limiting the ability of an IT company to work with private entrepreneur

What's happened

The law on Diia City has already been adopted. But the bill # 5376, which describes the tax conditions for him (and makes it possible to work), was adopted only in the first reading. On October 6, 2021, the  finance, tax and customs Policy Committee began consideration of this second bill.

During the meeting, Andrii Kholodov, a deputy from the Servant to the People party, proposed an amendment. According to it, the transition period for residents of Diia City from the private entrepreneurs model to gig contracts should last not 3 years, but 1 year.

Edits that are criticized in IT Ukraine:

  • on the restriction of the work of the resident companies of Diia City with private entrepreneurs: from 2024 to limit the work with private entrepreneurs by 50%, and from 2025 by 75% (Kholodov proposed such restrictions as early as January 1, 2023);
  • on the extension of tax incentives only to specialists who are referred to in the classifier of professions as "professionals in the programming industry", the association notes that modern IT professions cover not only programming;
  • on increasing the income tax from the promised 9% to 18% (which are valid for everyone now).

Why this decision is criticized in the association

In IT Ukraine, such edits are called tightening the screws and sabotage, since all private entrepreneurs will be transferred to labor relations or gig contracts without any alternative. And they will also cancel tax benefits for those specialists of the residents of Diia City who are not directly involved in programming. And the transition period for all resident companies of this regime will last only a year.

The Association sent a letter about these amendments to the minister of Digital transformation Mikhailo Fedoriv and the head of the profile committee Danylo Getmantsev.

Update: The head of the Servant of the People faction David Arakhamia noted that the parliamentary group supports the tax bill of the ministry of Taxes in the original version, without new amendments.

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