On 15 July, Ukraine’s Verkhovna Rada approved in the second reading and in principle the basic bill to establish the special legal regime of Diia City. The document was supported by 262 deputies.
Under the Diia City project, the Ministry of Digital Transformation intends to create favourable conditions for the development of the IT industry and to attract investments in information technology.
The legal regime provides a special tax model for IT companies, flexible employment terms, and a separate procedure for interaction with government supervisory bodies. The provisions of the law will remain in force for 25 years.
The Ministry of Digital Transformation stressed that the bill was developed in cooperation with representatives of the IT industry, and state influence on Diia City residents has been kept to a minimum.
“The general principles of Diia City’s functioning — freedom of operation, non-interference, and the presumption of lawfulness of activity — apply not only to residents of the regime but also to all IT companies,” the ministry said.
A few hours before the bill’s adoption, protests took place in Kyiv and Kharkiv, with several dozen IT specialists taking part.
According to a post by the online programmer community DOU, the protesters spoke out against the introduction of non-compete agreements, the transfer of the IT sector into a separate tax group, and the lack of clear criteria for obtaining residency in Diia City.
“The Rada is trying to pass a law that does not meet the stated goals. Deputies are pushing it under the banner of supporting the IT sector and development, but in fact the law lobbies the interests of large companies that already feel comfortable. Essentially it is aimed at reducing the mobility of IT workers,” commented a rally participant, Ivan.
The protesters demanded the resignation of the Minister of Digital Transformation, Mykhailo Fedorov, and, as a symbol of the IT sector’s collapse caused by government actions, smashed laptops.
In ForkLog’s comment, representatives of the Diia City project said that in drafting the law international IT-regulatory practices were taken into account.
“For the second reading, 358 amendment proposals from lawmakers were submitted. We have taken into account the wishes of the IT community and business associations that will operate under these rules. We are not changing the existing market rules, but creating conditions that will operate in parallel and on a voluntary basis,” they noted.
The project team emphasised that at the request of business the law excludes the clause on non-poaching agreements, and robotics and cybersecurity were added to the list of activities.
As reported in the April survey, 80% of IT workers in Ukraine did not support the introduction of Diia City. Among the concerns cited by respondents were:
- mistrust of the Ministry of Digital Transformation and the state as a whole (70%);
- abolition of the third group of private entrepreneurs’ simplified tax regime (FOP) (40%);
- lower salaries (33%);
- higher taxes (29%).
Read a detailed analysis of the Diia City project in ForkLog:
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