Aequo team acted as the key legal advisor to the Project Office of the Ministry of Digital Transformation on drafting and improvement of a framework law on the Diia City.
Draft Law No. 4303 on the stimulation of digital economy development in Ukraine was adopted on 15 July. Relevant amendments to the Tax Code are expected to be made at the beginning of the next parliamentary session.
The introduction of the Diia City legal regime means the acknowledgement of actual needs of creative industries and a civilized manner of providing them with special conditions to accelerate the development and competitiveness in global markets.
The following are the main (but far from all) benefits of the Diia City project:
· if the earlier widespread practices of mass employment of individual entrepreneurs in the IT area could be treated as an abuse of the right and tax avoidance, now there is an absolutely lawful way to obtain the same tax level (+1.5% of defence contribution tax);
· this means that business will be able to get both low taxes and compliance; legal and tax due diligence reports will contain less risks and Ukrainian companies will stand higher;
· there will arise an opportunity to raise funding (for the account of options and a convertible loan) without expenses related to the establishment and maintenance of a foreign company;
· gig contracts allow not to apply the Labour Code and at the same time reflect actual arrangements with IT specialists therein, including paid leaves and sick leaves, provision of office and equipment;
· it will be possible to remotely employ foreigners as gig contractors without obtaining a work permit; or vice versa, obtain such permit and a temporary residence certificate for them;
· to confirm the transfer of intellectual property rights in the deliverables of an IT specialist, significantly less documents will be required;
· the risk of corruption is reduced since government agencies will be able to carry out an out of schedule inspection of any Diia City resident only upon approval by the head or deputy head of the relevant central executive authority;
· if future parliaments deteriorate those terms within 25 years, then foreign investors will be able to claim for damages from the State of Ukraine through an international investment arbitration — this is a guarantee for stability of the Diia City terms, which guarantee is not obvious to all.
Anna Babych, Mykyta Polatayko, Oksana Krasnokutskaya, Olena Pertsova, and other members of the team will be glad to apply that unique experience and expertise in favour of our IT clients!