Proposals to Change Diia City Regime: Launch of Diia.City.Invest Funds

The Verkhovna Rada is currently considering Draft Law No. 14362, which introduces a comprehensive update to the Diia City regime. The proposed amendments aim to clarify residency criteria, refine the regulation of gig contracts and establish a new venture investment vehicle — Diia.City.Invest funds.

The draft law amends the Law of Ukraine “On Stimulating the Development of the Digital Economy in Ukraine” and related legislation, including the laws on collective investment institutions and capital markets.

1️⃣ Improvement of Residency Criteria

Current framework

Diia City residents benefit from a special tax regime, including the option to apply a 9% tax on distributed profits instead of the standard 18% corporate income tax, as well as reduced personal taxation for specialists.

To maintain resident status, a company must:

• engage at least 9 specialists;
• ensure an average monthly remuneration of not less than the equivalent of EUR 1,200 per specialist;
• comply with other qualifying requirements.

What changes

The draft law clarifies the calculation of the average monthly remuneration. Going forward, this indicator will include not only salaries paid to employees, but also payments made under gig contracts.

This significantly reduces the risk of technical non-compliance for companies operating under a gig-based engagement model.

2️⃣ New Rules for Gig Contracts

The draft law further specifies the structure of remuneration under gig contracts and introduces a “default mechanism” where the parties have not agreed on certain payment terms.

In particular:

• if the parties have not agreed on a monthly remuneration, it will be deemed equal to the company’s average monthly remuneration;
• the methodology for calculating daily remuneration is clarified;
• the structure of remuneration, including compensatory elements, is further regulated.

These changes are intended to reduce legal uncertainty and mitigate potential disputes.

3️⃣ Safeguard for Startups Exceeding the Income Threshold

Startup residents of Diia City may, during their first two years, be exempt from the minimum remuneration requirement, but are subject to an annual income cap of UAH 10 million.

Previously, exceeding this threshold created a risk of losing resident status. The draft law introduces a more flexible approach:

• exceeding the income limit does not automatically result in loss of status;
• the company must notify the authorised body electronically;
• starting from the following month, the company must comply with the standard criteria (9 specialists + EUR 1,200 average remuneration).

This mechanism prevents a “regulatory cliff” for rapidly growing startups.

4️⃣ Launch of Diia.City.Invest Funds

The most institutionally significant development is the introduction of specialised venture funds — Diia.City.Invest funds.

Legal status

A Diia City Invest Fund:

• is a closed-end, fixed-term venture corporate fund;
• invests exclusively in Diia City residents;
• carries out private placement of its shares;
• may be established for a term of up to 25 years.

The number of founders is limited to 15 persons.
The minimum authorised capital is 1,250 minimum wages.
The maximum capital is capped at the equivalent of EUR 50 million.

Simplified governance model

Unlike traditional collective investment institutions, where assets are managed by a licensed asset management company, a Diia City Invest Fund is managed by an individual manager (a natural person).

Key features include:

• asset management is not considered professional capital market activity;
• no asset management licence is required;
• the manager must meet business reputation requirements established by the securities regulator;
• restrictions apply regarding affiliation with the custodian, depository or auditor to prevent conflicts of interest.

This model is designed to significantly reduce the cost and time required to launch venture investment structures.

Accelerated registration procedure

Registration of the fund’s regulations, inclusion in the register, approval of the manager and registration of the share issue must be completed within five working days from submission of the required documents.

This represents an exceptionally fast regulatory process by Ukrainian capital markets standards.

If adopted, these changes may have a significant impact on both Ukrainian IT companies and investors considering investments in Ukrainian technology projects.