Diia City is not “just another benefit”, but a special legal and tax regime for IT, which since 2022 has been genuinely changing the economy of the sector.
For startups, it is essentially an opportunity to legally pay lower taxes at the start, have flexible collaboration formats (gig contracts instead of individual entrepreneurs), and at the same time build a company structure that meets the requirements of investors.
This regime is enshrined in the Law of Ukraine №1667-IX and, starting from 2025, will be significantly strengthened with tax changes (Law №4113-IX).
If you have already joined Diia City as a startup or are thinking about applying — this text is for you.
At Kreston Ukraine, we have supported both small AI/SaaS teams with 3-4 co-founders and companies that have grown over two years to 50+ specialists and several million euros in revenue. They all had the same dilemma: “How to take full advantage of the benefits and not lose the status due to formalities?”
Who is a “Startup” in the Context of Diia City
According to the Diia City legislation, a startup is a young IT company within 24 months of registration, which:
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operates in the types of activities listed in Article 5, Section 4 of the Law №1667 (SaaS, software development, R&D, gamedev, fintech, EdTech, AI, etc.);
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derives up to 90% of its income from these activities (or has no income at all — that’s not a problem);
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does not exceed the income limit set for the 3rd group of the unified tax system (1167 minimum wages, which for 2025 equals 9,336,000 UAH);
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does not have any “anti-criteria” (tax debt, bankruptcy, links with the aggressor state, etc.).
From practice: An AI startup with 3 founders and 1 gig specialist without contracts or revenue joined Diia City and, after just 9 months, closed its first round with six figures in US dollars. The key was to immediately register the types of activities, income structure, and document flow correctly.
How a Startup Differs from a “Regular” Resident
In short — a lower entry threshold, but a time-limited “trust period.”
1. Simplified Entry
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You can enter without a history of activities or a large team;
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A minimal team (effectively the core team) is enough.
2. Benefits Period
The startup benefits last until December 31 of the year following the year in which the status was obtained.
Example: Residency obtained in May 2025 — benefits will last until December 31, 2026.
After that, you must meet the “adult” criteria of Diia City:
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at least 9 specialists (employees + gig contractors);
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average remuneration ≥ 1200 EUR;
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qualified income ≥ 90%.
3. Lower Financial Requirements at the Start
At the entry stage, you don’t need to show large turnovers. This is important for pre-seed/seed teams that are still testing their product.
4. Focus on Scaling
This is not an “eternal startup.” The state expects that within two years you will:
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grow in revenue;
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form your team;
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be ready to meet all the criteria.
We had a case where a gamedev startup, not planning to grow its team to a minimum of 9 specialists, “missed” the end of the benefits period. It had to pay additional taxes for 3 months — the sum was significantly higher than the cost of system support.
Tax Advantages for Startups
1. Personal Income Tax (PIT) of 5% — the main “magnet” of Diia City
Since January 1, 2025 (Law №4113):
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Diia City startup residents can apply a 5% PIT rate to the income of their specialists;
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The condition — fewer than 9 specialists, but the average monthly remuneration should be at least 1200 EUR;
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The 5% rate applies from the month following the receipt of the residency status;
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In the month of entry — always 18%.
If by the end of the second year you haven’t reached 9 employees, the tax agent must charge additional PIT at 18% for the last 3 months. This is a “safeguard” to prevent formal residency without real development.
Kreston Practice: A SaaS company with 7 specialists and an average remuneration of around 2,000 EUR saved tens of thousands of euros annually from the 5% PIT compared to 18%, which went into the product and marketing, not additional tax payments.
2. Social Security Contributions (SSC) from the Minimum Salary
Starting from January 1, 2025, a Diia City startup resident can calculate SSC from the minimum salary, rather than the actual remuneration, even if there are fewer than 9 specialists, as long as:
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the average remuneration is ≥ 1200 EUR;
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no tax debt exists.
If by the end of the benefits period the requirements are not met, the company will have to charge SSC at 22% (8.41% for employees with disabilities) for the last 3 months, but without the 10% penalty.
3. Military Tax
From December 1, 2024, the military tax rate is 5% for everyone, including Diia City residents. There are no exemptions — this must be factored into your budget.
4. Profit Tax / Tax on Withdrawn Capital (TWC)
A Diia City startup can:
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remain on the classic profit tax regime; or
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switch to a regime similar to the tax on withdrawn capital (TWC) — 9% on defined operations (via the Diia app for declaration).
For product companies reinvesting profits, this often results in more predictable and lower tax payments. We’ve modeled both options for clients, and in most IT cases, 9% TWC was more advantageous.
5. VAT
VAT registration — applies when revenue exceeds 1,000,000 UAH over 12 months.
Some IT services for Diia City residents are exempt from VAT (subsection 197.1.33 of the Tax Code) — this needs to be correctly reflected in contracts and primary documents.
Gig Contracts, Mobilization Exemptions, Investments: What Startups Need to Know
Gig Contracts
For startups, gig contracts are a way to:
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avoid building a heavy HR department, as in traditional employment;
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quickly scale a team “under a project”;
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maintain social guarantees for specialists.
Starting in 2025, the law allows gig contracts to be confirmed not with acts, but with reports from CRM/trackers, as long as it’s specified in the contract.
Kreston Practice: Tax authorities still look at the quality of primary documents. Therefore, we recommend clients either:
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continue signing acts (at least once a month);
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or set up reporting documents with all the required details (date, period, scope of work, task references, signature/acceptance).
Mobilization Exemption (Critical Infrastructure Enterprises)
A Diia City resident can apply for “critical infrastructure” status and mobilization exemption for employees if at least 3 criteria are met, two of which are mandatory:
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no tax debt;
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average salary ≥ 2.5 minimum wages.
The third criterion can be selected from options (tax burden, foreign currency income, Diia City residency status, industry performance, etc.).
Only employees and beneficiaries can be exempt, not gig specialists — this should be considered when planning team structure.
IP Protection, NDA, NCA, and Investment Attractiveness
Diia City provides:
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a clear model for transferring intellectual property rights to the company;
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the ability to sign NDAs / NCAs with employees, gig specialists, and individual entrepreneurs;
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a more familiar structure for international investors regarding rights and contractual relationships.
This is one of the reasons why, in negotiations with funds, the phrase “we are Diia City residents” is already perceived as a compliance advantage, not just a legal detail.
What Startups Should Do Right Now
We recommend founders view Diia City not just as “about taxes,” but as a framework for business maturation:
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Assess if you meet the startup criteria (types of activities, income, company age).
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Calculate the benefit of 5% PIT and minimal SSC for 2 years — this is often your R&D budget.
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Plan your team and salaries in advance to avoid situations where “benefits have ended, criteria not met, additional payments are due.”
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Set up document flow: gig contracts, primary documents, IP policies, NDAs / NCAs.
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Meanwhile, prepare for investments: company structure, transparent financial reporting, clear tax model.
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Engage a reliable and experienced auditor and legal advisor.
Thus, Diia City is a real tool for reducing the tax burden, accelerating scaling, and enhancing the investment attractiveness of a startup. But it works only when you clearly understand the requirements, control dates and indicators, and don’t cut corners on compliance and auditors.
Need help entering Diia City or want to understand whether it’s truly beneficial for your startup?
Kreston Ukraine experts will help you:
- assess compliance with residency criteria;
- calculate the optimal tax model (5% PIT vs 18%, exit capital tax vs corporate income tax);
- properly structure gig contracts and your company setup;
- prepare for audits and avoid additional tax assessments.
Contact us for an individual consultation – we’ll review your case and offer the optimal solution for your business growth.
Best regards,
Kreston Ukraine Team
