Features of Diia.City in plain language

Peculiarities of employee income taxation

A reduced tax rate of 5% is established for Diia.City regime companies, which is payable:

🔹 from the income of specialists in the form of wages;

🔹 from the author’s remuneration for the creation of service works

🔹 from the remuneration for the transfer of rights to official works.

The rate of 5% is applied to income that is at most 240,000 euros per calendar year. If the specialist’s income exceeds the amount, the excess amount will have to be declared independently, and the income tax at 18% will be paid.

Gig contract

Another feature of the regime is a new type of contract called a gig contract. This contract represents a new cooperation model between an IT company and an IT specialist. By its very nature, it is a civil law contract that combines the best aspects of an employment contract and a contract with an sole proprietor. Features of gig contracts:

✔️ It is possible to hire a foreign worker without a prior employment permit and without complying with the wage requirement for foreigners in the amount of ten minimum wages;

✔️ According to the contract, the executor provides services and performs work or duties in a position in the company under the control of the customer in the place determined by him;

✔️ Intellectual property rights belong to the customer (IT company). This refers to the right to use the work, to allow the use of the work, and to prevent the use of the work. These rights may belong to the specialist if the contract stipulates it. The right to the name and the right to protection against distortion or distortion of the work remain inalienable and will belong to the specialist who created the object;

✔️ Working hours are no more than 40 hours per week, and an irregular working day may be set;

✔️ Such social guarantees as annual paid leave of at least 17 working days, sick leave, temporary disability benefits, and maternity leave are guaranteed.

🔹 When concluding a gig contract, you need to consider the following points:

1. The gig contract must clearly state that it is the gig contract that is being concluded and not the employment contract;
2. It must clearly define tasks related to the creation of objects of intellectual property law;
3. The specified conditions and procedure for the transfer of completed objects of intellectual property rights, which were created by order within the scope of the gig contract;
4. Conditions for payment of remuneration to the author for the creation and transfer of rights to intellectual property objects must be provided;
5. It is worth detailing the procedure for exchanging information through information and communication systems (including regarding tasks) concerning the performance of a gig contract.

Non-disclosure Agreement (NDA)

Diia.City residents can enter a Non-disclosure Agreement (NDA) with employees, potential investors, and contractors. This agreement aims to prevent the leakage of industrial or trade secrets obtained during negotiations, which could lead to losses. IT companies need such contracts so that their latest software developments cannot go to competitors, making it difficult to make profits in the future. The agreement must specify:

• information that is considered confidential;

• the period during which information cannot be disclosed;

• what constitutes disclosure;

• amount of compensation for disclosure;

• method of compensation for damages caused by disclosure.

NDA is widely used in other countries. In Switzerland, there is no separate law regulating confidentiality clauses, which is not an obstacle to including non-disclosure clauses in collective labor agreements. There is no specific form for the agreement, and it can be concluded orally. Instead, Germany has a special law on the protection of trade secrets. Freedom of contract is practiced for NDA agreements. The parties have the right to determine their content themselves. Restrictions are provided only if the agreements are contrary to good habits or customs of civil circulation.

Non-Compete Agreement (NCA)

Another type of agreement that a company resident in the regime has the right to conclude with its employees is a non-competition agreement (NCA). This contract is also completed with natural persons, entrepreneurs, and gig specialists. This contract aims to prevent the specialist from working for a competitor company or creating a company with similar activities. The following conditions should be included in the agreement:

🔹 territory of operation;

🔹 term of validity (during the period of cooperation of the specialist with the company and up to 1 year after the termination of the contract);

🔹 what is considered competition;

🔹 amount of payment.

The non-competition agreement is new for Ukraine and came to us from abroad, where they have long been widespread and regulated. In the USA, this type of contract is prevalent in television and radio broadcasting, but not all states allow it. In Germany and France, employers practice contracts, provided that the territory and term of validity are defined in the agreements and set out in writing.

Conclusion

Diia.City is an alternative legal regime that the company can choose at its discretion. There is a direct prohibition to force the transition to the status of a resident of Diia.City. IT specialists can take advantage of gig contracts, namely, not entering into long-term employment relationships for short-term tasks, and IT companies can determine the working conditions and control the order, time, and place of tasks. The non-disclosure and non-competition agreements are currently not regulated by labor law but are successfully used by Diia.City participants to protect their business interests.