Last week, the Verkhovna Rada of Ukraine adopted a law that amends the Tax Code of Ukraine regarding the tax burden on future Diy residents. The changes will take effect on January 1, 2022.
According to the adopted amendments, the following tax burden is set for Diya City residents:
– 1.5% military levy;
– 5% tax on income of an individual (including for employees under an employment contract);
– 22% of the single social tax on the minimum wage.
Residents may be subject to income tax (18%) or withholding tax (9%).
If the resident makes distributions no more than once every two years, the dividends are not taxable.
At the beginning of 2022 Cabinet of Ministers and the Ministry of Finance are expected to complete the formation of by-laws, to form a Register of residents, as well as approve the Commission, which will carry out the examination of applications for residency.
The Diya City should be fully operational in late January – early February. Here are the basic requirements for acquiring and maintaining the status of a resident of Diya.
Who can become a resident of Diya City?
- Registered legal entity in accordance with the legislation of Ukraine;
- Average monthly salary of employees – not less than 1200 euros;
- The implementation of one or more activities defined by part 4 of Art. 5 of the Act;
- At least 90% of the income must be qualified (derived from the activities defined in part 4 of Art. 5 of the Act);
- The applicant company must have no negative criteria (including the company is not registered in Ukraine, is unprofitable, has not disclosed the beneficiary owners, has shares owned directly or indirectly by the Russian state or its citizens).
In order to register, residents of Diya City must:
- submit an application to the Ministry of Digital Transformation of Ukraine;
- to indicate information about the chosen taxation system. If the applicant did not specify them, it is considered that the company has chosen income tax (18%);
- have certification that the company meets the residency criteria and that there are no negative criteria;
- give information about the amount of the applicant’s income for the previous year.
The Ministry considers such an application within 10 days. If on the 11th day no decision has been received on the submitted application – the company is considered to be a resident of the Diya.
…not later than in six months.
Not later than the last day of the sixth calendar month following the calendar month of acquiring residency, the company must submit to the Ministry
– аn initial report – a report of compliance with all residency requirements at the end of the three full months following the acquisition of residency status;
– independent auditor’s report upon examination of residency statements set forth in the initial report.
Every year, no later than June 1, a resident must submit to the Ministry of Foreign Affairs an annual report on residency eligibility for the preceding year (annual report), as well as an independent audit opinion regarding the review of the assertions made in the annual report.
The first annual report is for the period from the date of residency until December 31 of the calendar year.
Patriot.Legal provides legal and auditing support for obtaining residency in Diya City, preparing reports and conducting an independent audit.
Svyatoslav Lindyuk, Attorney of Litigation and Corporate Law Practice at Patriot.Legal