How IT company can join Diia City: a short guide

Recently, the Ukrainian parliament voted for the second bill regarding a unique operational mode for Ukrainian IT companies that will be effective in January 2022. AIN.UA has asked the Ministry of Digital Transformation that works on this subject about how IT enterprises can actually apply for the residency in Diia City. Here are the recommendations we’ve got:

What is Diia City? (in a nutshell)

Diia City is a special operational mode for Ukrainian IT companies providing special conditions, taxation, and a new form of interaction — gig contracts — for its participants. It also implements several terms from British law that will be useful for companies getting foreign investments — option contracts, convertible loans, etc. But it also introduces some limitations for the cooperation with FOPs (individual entrepreneurs).

How to check if a company may participate in Diia City?

AIN.UA has described entry terms of Diia City in the past; now we would like to recall them briefly (you can also check them under article 5 of the Digital Economy Promotion Law:

• A Diia City resident must be registered in Ukraine.
• The company must do one or more activities determined under part 4, article 5 of the Law (e.g., programming, software testing and publishing, developing computer games and databases, etc. — the complete list is stated at the end of this article, for more, please see the next part).
• The average monthly salary must be from 1,200 EUR according to the official exchange rate of the NBU.
• The average number of workers and gig specialists must be not less than nine.
• At least 90% of income must be qualified (it means it must be generated from the activities stated under part 4, article 5 of the Law).

What activities can be done by Diia City residents?

The activities that are supposed to be promoted by this Bill and are required from companies to join Diia City are following (we have shortened the list a bit, but still, it contains the main of them):

1. Computer programming, informatization consulting, hardware management, including
   1. Software development, modification, testing, and technical support, including computer games, and other types of work at all stages of the software development lifecycle, including business analysis, user interface design, etc.;
   2. System software and application development, including computer games, databases, and websites;
   3. Software setup for the customer informational systems and end-user devices; configuration of third-party software;
   4. Planning and projecting integrated computer systems combining hardware and software; consulting and training for users of such systems;
   5. Administration and operation of custom computer systems and/or data-processing means;
   6. Other development, modification, tests, and technical support of computer games.
2. Computer game publishing.
3. Providing online software products, including computer games.
4. Education in the IT industry.
5. Data processing and related activities, except for renting infrastructure for data processing and publishing (hosting); websites function, including automated data processing, report generation, website administration, etc.
6. Study and experimental development in natural and technical sciences connected with IT.
7. Performing marketing campaigns and providing advertising services using programs developed by a Diia City resident.
8. Organization of cybersport contests, teams, centers, and clubs for such competitions.
9. Providing services connected to virtual assets turnover.
10. Providing cybersecurity services for information and communication systems, including detection and protection against cyberattacks, liquidation of their consequences, etc.
11. Robotics.
12. Other types of activities determined by the Cabinet of Ministers.

How to apply for Diia City residency?

There are not so many details about how the Diia City entry process will look. However, according to the Ministry of Digital Transformation, it must be declarative and straightforward. What can we know for sure?

• To join Diia City, a firm registered as a legal entity must submit a specific application to the Ministry of Digital Transformation.
• It will be possible at the particular web portal that is being developed by the Ministry. AIN.UA will inform you about the start of the portal later.
• After submitting basic information about the company, all other data will be automatically loaded from state registries.
• The applicants must check if the final information is correct, sign the application with their digital signature, and press the “Submit” button.
• The declaration principle of application means that if there are no reasons to return it without acceptance, the company will automatically become a resident of the special mode. The Ministry reps said that Diia City would function on the tacit agreement: if an applicant received no response after ten days, his application is considered as accepted.
• The application can be returned without acceptance due to mistakes, lack of authorization of the company representative, no entries in the Unified State Register about the company, or according to the applicant’s will.  An application can also be declined if an applicant meets negative criteria.
• After applying, the candidate will be checked for negative criteria. The Ministry of Digital Transformation will use open sources — state registries, databases, information from authorities, and intergovernmental organizations. So, there will be no need to provide any references.
  • The negative criteria (causes for refusal) are, for example, a non-Ukrainian registration, a non-profit company, a firm with unknown beneficiaries, an entity the shares of which are directly or indirectly in possession of the Russian Federation or its citizens, etc. The complete list of negative criteria is stated under part 2, article 5 of the Law mentioned above.
• In addition, after 3 to 6 months of residency, the company must provide a compliance report and an auditor’s conclusion. Startups must submit it only after a year of residency.

We will update this article as we’ll receive more new data.