Accounting for Diia.City residents: what changes for IT companies

Diia.City residency changes three things for an IT company at once: corporate income tax (9% only on capital withdrawn from the business instead of 18% on profit), the taxation of specialists (5% personal income tax, a 5% military levy and the single social contribution at the minimum insurance contribution, UAH 1,902.34 in 2026), and the reporting cycle, which gains a compliance report backed by an independent opinion from an audit firm.

Residency criteria: what the accountant checks every month

The requirements are set out in Article 5(1) of the Law of Ukraine "On Stimulating the Development of the Digital Economy in Ukraine" No. 1667-IX of 15 July 2021. There are five of them, and four carry the substance: carrying on one or more of the activities listed in Article 5(4); an average monthly remuneration of employees and gig specialists of at least the equivalent of EUR 1,200 at the official hryvnia-to-euro rate set by the National Bank of Ukraine (NBU) on the first day of the relevant calendar month; an average headcount of employees and gig specialists of at least nine people; and qualifying income of at least 90% of total income. The fifth requirement is the absence of the circumstances listed in Article 5(2).

These tests are measured over different periods, and people often mix them up. Remuneration and headcount are calculated for each calendar month, starting with the month after the month in which the company obtained resident status. Qualifying income is measured over the first three calendar months after that month, and then for each calendar year of residency.

Article 5(2) contains a "stop list". The following cannot be residents: legal entities in which the state or a territorial community directly or indirectly holds 25% or more of the share capital; non-profit enterprises, institutions and organisations; persons in breach of the rules on disclosing ultimate beneficial owners; sanctioned persons and persons connected with them; bankrupt entities; entities being wound up (other than by conversion); and entities that for more than 30 days have tax debt exceeding 10 minimum wages (based on the minimum wage as of 1 January of the current calendar year). The last item is purely an accounting risk, because it depends on the state of settlements with the budget.

There is also a "start-up exception" (Article 5(3)): a legal entity that does not meet all the requirements of Article 5(1) may still hold Diia.City resident status, but no later than 31 December of the calendar year following the year in which it obtained the status. Four conditions apply: compliance with items 1, 4 and 5 of Article 5(1) (so the company may fall short of both the average remuneration and the headcount tests at the same time); state registration of the legal entity no earlier than 24 calendar months before the application for resident status; income determined under subparagraph 2 of paragraph 292.1 of Article 292 of the Tax Code of Ukraine (ПКУ) not exceeding the limit set by paragraph 291.4 of Article 291 of the Tax Code for single tax group 3, in each of the four years listed in Article 5(3); and a statement in the application that the company is applying to the authorised body under Article 5(3). By that deadline the indicators must be brought into line, or the company will lose its status.

Two tax regimes: 9% tax on withdrawn capital or 18% corporate income tax

At company level the choice comes down to two options: remain a corporate income tax payer at the standard 18% rate (paragraph 136.1 of the Tax Code) or become a payer of tax under special conditions, widely known as the tax on withdrawn capital (ПнВК), at 9% of the tax base (paragraph 136.8 of the Tax Code). The base is determined under paragraphs 135.2, 137.10 and 141.9-1 of the Tax Code, and the resident calculates the tax itself (subparagraph 137.10.1).

The tax on withdrawn capital applies to the transactions listed in subparagraph 141.9-1.2 of the Tax Code: dividends paid to a shareholder that is not a Diia.City resident paying this tax (141.9-1.2.1); royalties paid to a person that is not a Diia.City resident paying this tax (141.9-1.2.10); financial assistance provided to a related party that does not pay the tax on withdrawn capital (whether or not it is repayable); and assistance not repaid by an unrelated party within 12 calendar months (141.9-1.2.6 and 135.2.1.7). As long as profit is reinvested, no liability arises, so the benefit of this regime is directly proportional to the share of profit the company retains.

For a payer of the tax on withdrawn capital, the base reporting period is the calendar year. The first tax period starts on the first day of the month following the quarter in which the company was entered in the Diia.City register (or in which it filed its application to switch), under subparagraphs 137.10.3 and 141.10.2 of the Tax Code. This is a common planning mistake: the month in which the status is obtained and the month in which the regime starts do not coincide. A resident that pays corporate income tax under the general rules must file its application to switch with the tax authority at least 15 calendar days before the start of the next calendar quarter, and may switch only once in a calendar year (141.10.2). Tax liabilities are reported in the tax return for the tax (reporting) year in which one of the events listed in subparagraph 137.10.4 occurred in respect of taxable transactions; for a payer under the general system the reporting periods are the quarter, half-year, nine months and year (paragraph 137.4). A single tax payer switches to paying other taxes from the first day of the month following the quarter in which it obtained the status (item 10 of subparagraph 298.2.3).

The 20% rule for payments to single-tax sole proprietors

A separate object of the tax on withdrawn capital is payments to single tax payers for property, works and services purchased (other than royalties) to the extent they exceed 20% of total expenses from all activities for the previous annual reporting period, as shown in the Statement of Financial Results (Statement of Comprehensive Income), under subparagraphs 141.9-1.2.12 and 135.2.1.15 of the Tax Code. The rule applies to tax (reporting) periods from 1 January 2024, but in 2024 the threshold was 50% and only fell to 20% from 2025 (item 59 of subsection 4 of Section XX of the Tax Code). For a company with a large pool of contractors registered as sole proprietors (ФОП), this makes the model directly more expensive: the amount above the threshold is taxed at 9%.

This sets a requirement for the accounts: expenses must be analysed by counterparty type, separating single tax payers from everyone else, and the base for the threshold is taken from the previous year's expenses in the financial statements, including expenses related to operating, financing and investing activities. Residents registered during the reporting year calculate the share using figures for the current annual reporting period. This is the point at which the accounting set-up is reviewed, ideally before the application is filed.

Taxation of specialists: 5% personal income tax, 5% military levy, minimum social contribution

The 5% personal income tax rate (ПДФО, paragraph 167.2 of the Tax Code) applies to the salaries of employees, remuneration under gig contracts and author's remuneration for works created in the course of employment. It applies from the calendar month following the month in which the status was obtained and does not extend to a resident that also holds Defence City resident status (subparagraph 170.14-1.2). Income accrued in the month in which the status was obtained is taxed at 18% (paragraph 167.1).

The most common error in Ukrainian publications is a military levy of 1.5%. That figure is out of date: the levy is 5% (subparagraph 1.3 of paragraph 16-1 of subsection 10 of Section XX of the Tax Code, as amended by Law No. 4015-IX of 10 October 2024, in force since 1 December 2024), and it remains 5% in 2026. Diia.City residents have no separate relief, so the actual amount withheld from a specialist's income is 10%.

For a Diia.City resident (other than a resident that also holds Defence City status), the single social contribution (ЄСВ) is charged at the minimum insurance contribution, regardless of the actual salary or gig remuneration (Article 8(14-1) of Law No. 2464-VI). The rule is mandatory in its wording ("is set"), so a resident cannot choose to pay the contribution on the actual salary. One detail of the rule matters: this amount applies for calendar months in which the resident met the requirements of items 2 and 3 of Article 5(1) and item 10 of Article 5(2) of Law No. 1667-IX, starting with the month after the month in which the status was obtained. The contribution rate is 22% of the base (Article 8(5) of Law No. 2464-VI), and the minimum insurance contribution is calculated as the minimum wage multiplied by that rate (Article 1(1)(5) of the same Law).

Key figures for specialists, 2025 and 2026

The EUR 240,000 cap applies to a specialist's total (annual) taxable income in the form of salary or gig remuneration, so it covers all such income together and each contract is not assessed separately. The individual must report the excess in the annual declaration of property and income and pay 18% tax on it personally (subparagraph 170.14-1.3). Since the company cannot see other contracts, the practical solution is a contractual obligation for the specialist to notify the company when the cap is reached.

Gig contract, employment contract or sole proprietor

Comparison of engagement models for a Diia.City resident

A gig specialist is entitled to an annual paid break from work of 17 working days, unless the gig contract provides for a longer one. The right can be used only after six consecutive months of work under the gig contract (unless the contract sets a shorter period), and the cost is borne by the Diia.City resident (Article 21 of Law No. 1667-IX). Gig specialists are covered by insurance against temporary incapacity for work and are entitled to sick pay (Article 22(1) of Law No. 1667-IX). Both the paid break and sick pay are separate accruals, and the procedure for them should be set out in the accounting policy and in the gig contract itself.

The "non-compliance month": how the 18% top-up works

If in a given calendar month the resident did not meet the average remuneration or headcount requirements (items 2 and 3 of Article 5(1) of Law No. 1667-IX), it must, as a tax agent, charge personal income tax at 18% on that month's salaries and gig remuneration in its tax return and pay the difference at its own expense before filing the return, less the tax already paid on that income (subparagraph 170.14-1.5 of the Tax Code). The tax paid in this way is not included in the specialists' taxable income. Until 31 December of the year following the year in which the status was obtained under Article 5(3), this rule does not apply to a failure to meet the headcount requirement (subparagraph 170.14-1.6, added by Law No. 4113-IX of 4 December 2024). In other words, a start-up resident keeps the 5% rate even with fewer than nine people, but must still meet the average remuneration requirement.

Dividends and income tax under IAS 12

Dividends accrued to an individual by an issuer that is a Diia.City resident paying the tax on withdrawn capital are excluded from the individual's total monthly (annual) taxable income, provided that the resident has not paid dividends on shares or other corporate rights for two consecutive calendar years (subparagraph 170.5.5 of the Tax Code). Because of this condition, the payment schedule becomes a matter for tax planning as well as a decision for the owners.

For companies reporting under IFRS, switching to the tax on withdrawn capital changes the whole logic of accounting for income tax. The regime taxes specific transactions (subparagraph 141.9-1.2 of the Tax Code) and has no concept of temporary differences between the carrying amounts and tax bases of assets and liabilities. In jurisdictions where income taxes are payable at a different rate if profit is paid out as dividends, IAS 12 requires current and deferred tax assets and liabilities to be measured at the rate applicable to undistributed profits (paragraph 52A), with the tax consequences of dividends recognised when the liability to pay the dividend is recognised (paragraph 52B). This is critical for groups with a foreign investor, which is why IFRS reporting is redesigned at the same time as the tax regime changes.

Resident reporting and deadlines

Main reports of a Diia.City resident

Independent opinion and statutory audit: two separate engagements

The independent opinion for Diia.City is a separate engagement from an audit of financial statements. It examines the assertions the resident makes in its compliance report about the average monthly remuneration of employees and gig specialists for each calendar month of the reporting period, the average headcount of employees and gig specialists, and the share of qualifying income (Article 13(4) of Law No. 1667-IX). The opinion may be issued only by an audit entity that, under the Law of Ukraine "On the Audit of Financial Statements and Auditing Activities", is entitled to carry out statutory audits of financial statements (Article 13(5)). Residents that obtained the status under the start-up exception file their initial report without an opinion. However, if the authorised body finds discrepancies between the report and the financial statements filed, it sends a request, and the opinion must then be submitted within 60 days of receiving it (Article 13(2)).

Resident status does not by itself trigger a statutory audit of the annual financial statements. That obligation arises under the general rules: the criteria for classifying a company as medium-sized or large are set by Article 2 of Law No. 996-XIV (at least two of three indicators: the carrying amount of assets, net revenue from sales and the average number of employees), while the obligation to publish annual financial statements together with the auditor's report is set by Article 14 of the same Law and by Law No. 2258-VIII "On the Audit of Financial Statements and Auditing Activities" of 21 December 2017. An IT company may therefore face two separate engagements: the independent opinion under Article 13 of Law No. 1667-IX and a statutory audit of its financial statements. It makes sense to plan them together.

Loss of status and critical enterprise status from 2 June 2026

Article 9(1) of Law No. 1667-IX gives an exhaustive list of six grounds for losing the status: an application by the resident itself to terminate its status; non-compliance with Article 5 reported to the authorised body in the resident's compliance report and/or the independent opinion; non-compliance with items 1 or 5 of Article 5(1) identified by the authorised body from state registers, databases and information systems; a delay of more than 20 working days in filing the report and/or the opinion; a repeated consecutive breach of the filing deadlines; and a court decision that has entered into force. The decision is taken within five or 20 working days depending on the ground (Article 9(2)), and a resident that has received an electronic notice from the authorised body may submit explanations within five working days of receiving it (Article 9(3)).

In 2026 the accounts team has a new task: supporting the deferment of employees from mobilisation (бронювання). Cabinet of Ministers Resolution No. 692 of 30 May 2026 (published in the government newspaper Uriadovyi Kurier on 2 June 2026 and in force from that date) restated sub-item 7 of item 2 of the Criteria approved by Cabinet Resolution No. 76 of 27 January 2023. Under the new wording, a company qualifies if it is a Diia City resident and meets the requirement of item 2 of Article 5(1) of Law No. 1667-IX, "as confirmed by tax returns on the amounts of income accrued (paid) to individual taxpayers and the amounts of tax withheld from them, as well as the amounts of the single contribution accrued for the last six calendar months, filed by the enterprise, institution or organisation in accordance with the procedure established by law". In other words, a resident proves it is critical specifically through the average monthly remuneration of at least the EUR 1,200 equivalent, and specifically through the returns it has filed.

The indicator itself follows the definition in Article 1(1)(12) of Law No. 1667-IX: the total of all remuneration (salary) payments before taxes, levies and other mandatory deductions made to employees and gig specialists in the calendar month is divided by the total number of people who received such payments, converted at the NBU rate on the first day of that month. Earlier decisions on critical status remain valid only for a limited time: under item 2 of Resolution No. 692, as amended by Cabinet Resolution No. 862 of 1 July 2026, they stay in force for the period for which they were issued, but no later than 1 September 2026, unless by 10 August 2026 the company filed a statement of the average salary accrued to insured employees and the tax return for the last calendar month. The practical consequence for newcomers is plain: six months of filed returns cannot be shown immediately after obtaining the status.

What to prepare for in 2026–2027

Draft Law No. 14362 of 9 January 2026 "On Amendments to the Law of Ukraine 'On Stimulating the Development of the Digital Economy in Ukraine' and Certain Other Legislative Acts to Improve the Instruments for Stimulating the Development of the Digital Economy" has been registered in the Verkhovna Rada. The relevant committee considered it on 4 February 2026 and issued its conclusion on 6 February 2026, and a draft resolution on adopting it at first reading (No. 14362/П) was registered on 9 February 2026. As of August 2026, however, the bill had not been adopted and was awaiting consideration. The conclusion is simple: it is too early to build accounting decisions around its provisions, but the text is worth monitoring.

In parallel, the Defence City regime has applied since 5 October 2025 (Law of Ukraine No. 4577-IX of 21 August 2025). A Defence City resident's profit is exempt from tax provided that the exempt profit is invested in developing its activities in the areas listed in item 76.1 of subsection 4 of Section XX of the Tax Code no later than 31 December of the calendar year following the reporting year. The key restriction: one of the conditions for this exemption is expressly that the taxpayer is not a Diia City resident. The mirror rule also applies: the minimum social contribution rule (Article 8(14-1) of Law No. 2464-VI) and the reduced 5% personal income tax rate (subparagraph 170.14-1.2 of the Tax Code) do not apply to a Diia City resident that also holds Defence City status. For defence tech this is an either-or choice, and it has to be modelled on the figures of the specific payment structure.

Frequently asked questions

What is the military levy rate for Diia.City employees and gig specialists in 2026?

In 2026 the military levy is 5% on both the salaries of employees and the remuneration of gig specialists of a Diia.City resident; the Tax Code of Ukraine provides no separate reduced rate. The rate was raised from 1.5% to 5% by Law No. 4015-IX of 10 October 2024, in force since 1 December 2024 (subparagraph 1.3 of paragraph 16-1 of subsection 10 of Section XX of the Tax Code), so together with personal income tax the total withholding is 10%.

How much single social contribution does a Diia.City resident pay per specialist in 2026?

The single social contribution is charged at the minimum insurance contribution regardless of actual income, which in 2026 is UAH 1,902.34 per person per month: 22% of the UAH 8,647 minimum wage set by Article 8 of Law No. 4695-IX of 3 December 2025. Article 8(14-1) of Law No. 2464-VI is mandatory in its wording, so a resident is not permitted to pay the contribution on the actual salary. The rule applies for months in which the resident met the requirements of items 2 and 3 of Article 5(1) and item 10 of Article 5(2) of Law No. 1667-IX, and it does not extend to a resident that also holds Defence City status.

Is an audit mandatory for a Diia.City resident?

Diia.City resident status does not by itself require a statutory audit of the annual financial statements: the criteria for classifying a company as medium-sized or large are set by Article 2 of Law No. 996-XIV, and the obligation to publish annual financial statements with the auditor's report is set by Article 14 of the same Law and by Law No. 2258-VIII "On the Audit of Financial Statements and Auditing Activities". What a resident does need is an independent opinion attached to its annual compliance report. This opinion is a separate engagement from a financial statement audit, and it may be issued only by an audit entity entitled to carry out statutory audits (Article 13(5) of Law No. 1667-IX).

Which is better for an IT company: a gig contract or a sole proprietor contractor?

A gig contract counts towards the residency criteria, both headcount and average remuneration. Payments to sole proprietors do not count, and once they exceed 20% of the previous year's expenses they become subject to the 9% tax on withdrawn capital (subparagraphs 141.9-1.2.12 and 135.2.1.15 of the Tax Code). On the other hand, a gig specialist adds the minimum social contribution and paid leave to the company's costs, so a large sole-proprietor model under Diia.City needs to be recalculated on the figures of the specific payment structure.

Can the single tax be combined with Diia.City resident status?

No. A single tax payer that obtains Diia.City resident status must switch to paying other taxes and levies from the first day of the month following the tax (reporting) quarter in which it obtained the status (item 10 of subparagraph 298.2.3 of the Tax Code). The company then chooses between corporate income tax at the standard 18% rate (paragraph 136.1) and tax under special conditions at 9% (paragraph 136.8).

On what grounds can a company lose Diia.City resident status?

Article 9(1) of Law No. 1667-IX sets out an exhaustive list of six grounds: an application by the resident itself; non-compliance with Article 5 shown by the compliance report or independent opinion it filed; non-compliance with items 1 or 5 of Article 5(1) identified by the authorised body from state registers and databases; a delay of more than 20 working days in filing the report and/or the opinion; a repeated consecutive breach of the deadlines; and a court decision that has entered into force. Tax debt exceeding 10 minimum wages that remains unpaid for more than 30 days is a particular danger: it falls under item 10 of Article 5(2), which means non-compliance with Article 5.

If you are planning to join Diia.City, or already hold the status and want to check your tax rates, the calculation of the tax on withdrawn capital and the completeness of your reporting, Key Solutions specialists can review your situation as part of a tax audit of your company.