![\"\u041d\u0430\u0442\u0430\u043b\u0456\u044f](\"https:\/\/audit-invest.com.ua\/wp-content\/uploads\/2024\/11\/image_2024_11_25T13_29_10_689Z.png\")
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\nNataliia Negoliuk <\/strong>,
\nAuditor at LLC AF “AUDIT-INVEST”
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Table of Contents<\/h3>\n\n- Definition of Startups According to the Law<\/a><\/li>\n
- Income Criteria and Restrictions<\/a><\/li>\n
- Tax Benefits for Startups<\/a><\/li>\n
- Reporting Under the Diia City Law<\/a><\/li>\n<\/ol>\n<\/div>\n
The Diia City regime was created to allow new technology companies to grow faster and operate flexibly, without the burden of high tax rates and HR requirements that are usually manageable only by large IT corporations.<\/span><\/p>\nThe legislation provides startups with a specific grace period\u2014a kind of “incubator”\u2014where they can operate under reduced requirements.<\/span><\/p>\nThis article provides a concise overview of the key conditions, risks, and opportunities that newly established companies must consider.<\/span><\/p>\nDefinition of Startups According to the Law<\/h2>\n
According to the Law of Ukraine “On Stimulating the Development of the Digital Economy in Ukraine” dated July 15, 2021, No. 1667-IX (hereinafter \u2013 Law No. 1667-IX<\/strong>), a startup is defined as a newly established IT company \u2014 a Diia City resident<\/strong> \u2014 that meets additional criteria and can benefit from special simplified conditions, provided it fulfills general requirements within a limited period.<\/span><\/p>\n\nThe key characteristics of a Diia City resident startup, as prescribed in Part 3 of Article 5 of Law No. 1667-IX,<\/a> are:\u00a0<\/span><\/p>\n\n- Type of Activity:<\/strong> The company must engage in one or more activities defined by the law (software development, cybersecurity, R&D, etc.). This activity must be specified in the company’s Charter and the Unified State Register (USR).<\/span><\/li>\n
- Qualified Income:<\/strong> For the first 3 months after acquiring resident status and every year thereafter, at least 90%<\/strong> of the company’s revenue must come from permitted IT activities.<\/span><\/li>\n
- Company Age:<\/strong> State registration of the company must have occurred no earlier than 24 calendar months<\/strong> prior to the date of application for Diia City residency.<\/span><\/li>\n
- Income Limit: <\/strong>The company’s annual income must not exceed a certain limit (1,167 minimum wages<\/strong> set as of January 1 of the reporting year) For 2025, this limit is UAH 9,336,000<\/strong><\/i>.<\/strong><\/span>\n
This limit applies to each of the following years:<\/span><\/p>\n\n- \n
The calendar year preceding the year the company applied for Diia City residency.<\/span><\/p>\n<\/li>\n- \n
The calendar year in which the company applied for residency.<\/span><\/p>\n<\/li>\n- \n
The calendar year in which the company acquired residency.<\/span><\/p>\n<\/li>\n- \n
The calendar year following the year the company acquired residency.<\/span><\/p>\n<\/li>\n<\/ol>\n<\/li>\n<\/ul>\n<\/div>\n<\/div>\n\n!<\/div>\n\nImportant Note<\/strong>:This indicator determines whether a company can maintain its startup status during the transition period. If a company’s income exceeds the limit, it loses the right to be considered a “startup” in Diia City.<\/strong><\/span><\/p>\n<\/div>\n<\/div>\nThe transition to the general business taxation system is significantly more expensive. Therefore, regular income monitoring is, in fact, a control over the right to remain not only a “startup” but also a Diia City resident.<\/span><\/p>\nPractical Example: A company was officially registered in the Diia City register in March 2025. Over the following months, its income was as follows:<\/span><\/p>\n\n- \n
April 2025: UAH 1,500,000.00<\/span><\/p>\n<\/li>\n- \n
May 2025: UAH 2,500,000.00<\/span><\/p>\n<\/li>\n- \n
June 2025: UAH 3,000,000.00<\/span><\/p>\n<\/li>\n- \n
July 2025: UAH 3,500,000.00<\/span><\/p>\n<\/li>\n<\/ul>\nThe total income for this period (April\u2013July 2025) reached UAH 10,500,000.00.<\/span><\/p>\nSince the legislative income limit for maintaining startup status (which is UAH 9,336,000 for 2025) was exceeded specifically in July 2025, the company loses its “startup” status starting from that month. Consequently, it becomes obligated to fulfill all standard Diia City residency criteria as prescribed by Law No. 1667-IX.<\/span><\/p>\n\nIncome Criteria and Restrictions<\/h2>\n<\/div>\n\nRecommendations for Income Control:<\/strong><\/span><\/p>\n\n- \n
Monthly Monitoring: Maintain a monthly income tracker with a forecast until the end of the year.<\/span><\/p>\n<\/li>\n- \n
Rapid Growth Strategy: Prepare in advance for the transition from “startup” mode to “standard” Diia City residency if your business is scaling quickly.<\/span><\/p>\n<\/li>\n- \n
Contract Planning: Plan large contracts carefully, taking into account the maximum income threshold.<\/span><\/p>\n<\/li>\n- \n
Compliance Checks: Conduct periodic audits of residency criteria together with a professional accountant or legal advisor.<\/span><\/p>\n<\/li>\n<\/ul>\n<\/div>\n\n- Legal Point:<\/strong> The application for residency must explicitly state that the Company is applying as a “startup resident” in accordance with Part 3<\/a> of Article 5 of Law No. 1667-IX.\u00a0<\/b><\/span><\/li>\n
- Anti-Criteria (Disqualifying Factors)<\/strong> A company cannot be a Diia City resident if any circumstances listed in Part 2 of Article 5 of Law No. 1667-IX apply, specifically:<\/span>\n
\n- \n
Aggressor State Ties: Connections with an aggressor state or sanctioned persons.<\/span><\/p>\n<\/li>\n- \n
Non-Profit\/Foreign Entity: The company is non-profit or registered outside of Ukraine.<\/span><\/p>\n<\/li>\n- \n
Tax Debt: Significant tax debt exceeding 10 minimum wages for more than 30 days.<\/span><\/p>\n<\/li>\n- \n
Beneficial Ownership: Failure to disclose ultimate beneficial owners (UBOs).<\/span><\/p>\n<\/li>\n- \n
Liquidation: The company is in the process of liquidation or bankruptcy.<\/span><\/p>\n<\/li>\n- \n
State\/Municipal Stake: Legal entities with a state or municipal share of 25% or more in the authorized capital.<\/span><\/p>\n<\/li>\n<\/ul>\n<\/li>\n- Validity Period<\/strong> The “startup resident” status is valid until the end of the next calendar year after it was obtained.<\/span><\/li>\n<\/ul>\n
Example: If a Company received the status in 2025, it remains valid until December 31, 2026.<\/span><\/p>\nExemptions for Startups During the Grace Period<\/span>
\nLaw No. 1667-IX provides startups with significant relaxations regarding residency criteria during the grace period:<\/span><\/p>\n\n- Remuneration Level:<\/strong> The average monthly remuneration for employees and GIG-specialists may be less than the equivalent of \u20ac1,200.<\/span><\/li>\n<\/ul>\n
Note: In this case, the standard PIT rate of 18% applies instead of the 5% incentive rate.<\/span><\/p>\nStaff Count: The average number of employees and GIG-specialists may be fewer than nine persons.<\/span><\/p>\n\n\u00a0Note<\/strong>: A startup must achieve full compliance with all general residency criteria by the end of the next calendar year after acquiring its status. If the company fails to meet the requirements regarding the minimum number of specialists (9+) and the minimum remuneration level (\u20ac1,200 equivalent) after the grace period ends, it will automatically lose its Diia City resident status.<\/strong><\/span><\/p>\n<\/div>\nTax Benefits for Startups<\/h2>\n
Startups enjoy the same preferential tax conditions as other Diia City residents.\u00a0 This significantly reduces the overall tax burden and allows for more reinvestment into product development:<\/span><\/p>\n\n
The Diia City regime was created to allow new technology companies to grow faster and operate flexibly, without the burden of high tax rates and HR requirements that are usually manageable only by large IT corporations.<\/span><\/p>\n The legislation provides startups with a specific grace period\u2014a kind of “incubator”\u2014where they can operate under reduced requirements.<\/span><\/p>\n This article provides a concise overview of the key conditions, risks, and opportunities that newly established companies must consider.<\/span><\/p>\n According to the Law of Ukraine “On Stimulating the Development of the Digital Economy in Ukraine” dated July 15, 2021, No. 1667-IX (hereinafter \u2013 Law No. 1667-IX<\/strong>), a startup is defined as a newly established IT company \u2014 a Diia City resident<\/strong> \u2014 that meets additional criteria and can benefit from special simplified conditions, provided it fulfills general requirements within a limited period.<\/span><\/p>\n The key characteristics of a Diia City resident startup, as prescribed in Part 3 of Article 5 of Law No. 1667-IX,<\/a> are:\u00a0<\/span><\/p>\n This limit applies to each of the following years:<\/span><\/p>\n The calendar year preceding the year the company applied for Diia City residency.<\/span><\/p>\n<\/li>\n The calendar year in which the company applied for residency.<\/span><\/p>\n<\/li>\n The calendar year in which the company acquired residency.<\/span><\/p>\n<\/li>\n The calendar year following the year the company acquired residency.<\/span><\/p>\n<\/li>\n<\/ol>\n<\/li>\n<\/ul>\n<\/div>\n<\/div>\n Important Note<\/strong>:This indicator determines whether a company can maintain its startup status during the transition period. If a company’s income exceeds the limit, it loses the right to be considered a “startup” in Diia City.<\/strong><\/span><\/p>\n<\/div>\n<\/div>\n The transition to the general business taxation system is significantly more expensive. Therefore, regular income monitoring is, in fact, a control over the right to remain not only a “startup” but also a Diia City resident.<\/span><\/p>\n Practical Example: A company was officially registered in the Diia City register in March 2025. Over the following months, its income was as follows:<\/span><\/p>\n April 2025: UAH 1,500,000.00<\/span><\/p>\n<\/li>\n May 2025: UAH 2,500,000.00<\/span><\/p>\n<\/li>\n June 2025: UAH 3,000,000.00<\/span><\/p>\n<\/li>\n July 2025: UAH 3,500,000.00<\/span><\/p>\n<\/li>\n<\/ul>\n The total income for this period (April\u2013July 2025) reached UAH 10,500,000.00.<\/span><\/p>\n Since the legislative income limit for maintaining startup status (which is UAH 9,336,000 for 2025) was exceeded specifically in July 2025, the company loses its “startup” status starting from that month. Consequently, it becomes obligated to fulfill all standard Diia City residency criteria as prescribed by Law No. 1667-IX.<\/span><\/p>\n Recommendations for Income Control:<\/strong><\/span><\/p>\n Monthly Monitoring: Maintain a monthly income tracker with a forecast until the end of the year.<\/span><\/p>\n<\/li>\n Rapid Growth Strategy: Prepare in advance for the transition from “startup” mode to “standard” Diia City residency if your business is scaling quickly.<\/span><\/p>\n<\/li>\n Contract Planning: Plan large contracts carefully, taking into account the maximum income threshold.<\/span><\/p>\n<\/li>\n Compliance Checks: Conduct periodic audits of residency criteria together with a professional accountant or legal advisor.<\/span><\/p>\n<\/li>\n<\/ul>\n<\/div>\n Aggressor State Ties: Connections with an aggressor state or sanctioned persons.<\/span><\/p>\n<\/li>\n Non-Profit\/Foreign Entity: The company is non-profit or registered outside of Ukraine.<\/span><\/p>\n<\/li>\n Tax Debt: Significant tax debt exceeding 10 minimum wages for more than 30 days.<\/span><\/p>\n<\/li>\n Beneficial Ownership: Failure to disclose ultimate beneficial owners (UBOs).<\/span><\/p>\n<\/li>\n Liquidation: The company is in the process of liquidation or bankruptcy.<\/span><\/p>\n<\/li>\n State\/Municipal Stake: Legal entities with a state or municipal share of 25% or more in the authorized capital.<\/span><\/p>\n<\/li>\n<\/ul>\n<\/li>\n Example: If a Company received the status in 2025, it remains valid until December 31, 2026.<\/span><\/p>\n Exemptions for Startups During the Grace Period<\/span> Note: In this case, the standard PIT rate of 18% applies instead of the 5% incentive rate.<\/span><\/p>\n Staff Count: The average number of employees and GIG-specialists may be fewer than nine persons.<\/span><\/p>\n \u00a0Note<\/strong>: A startup must achieve full compliance with all general residency criteria by the end of the next calendar year after acquiring its status. If the company fails to meet the requirements regarding the minimum number of specialists (9+) and the minimum remuneration level (\u20ac1,200 equivalent) after the grace period ends, it will automatically lose its Diia City resident status.<\/strong><\/span><\/p>\n<\/div>\n Startups enjoy the same preferential tax conditions as other Diia City residents.\u00a0 This significantly reduces the overall tax burden and allows for more reinvestment into product development:<\/span><\/p>\nDefinition of Startups According to the Law<\/h2>\n
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Income Criteria and Restrictions<\/h2>\n<\/div>\n
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\nLaw No. 1667-IX provides startups with significant relaxations regarding residency criteria during the grace period:<\/span><\/p>\n\n
Tax Benefits for Startups<\/h2>\n