On August 14, 2021, the Law of Ukraine № 1667-IX on Diia City came into force, which aims to develop the IT environment in Ukraine by introducing alternative mechanisms and forms of activity of companies and specialists in this field. In particular, Diia City resident status, new rules of preferential taxation, reporting, forms of attracting specialists, etc., are being introduced for companies.
Among the innovations, we will pay special attention to cooperation between a resident of Diia City and a specialist based on a “gig-contract” and identify the key features of such a relationship.
A company that has acquired the status of a resident of Diia City can choose one of three ways of relationship:
A gig-specialist is a natural person who acts as a contractor and/or executor under a gig contract.
The law stipulates that a gig-specialist receives remuneration in the amount, procedure, and terms specified in the gig-contract. In this case, the amount of remuneration can be measured in one of the following ways:
– remuneration set for a specific period of cooperation;
– remuneration is proportional to the actual results of work/provision of services;
– remuneration in proportion to the time spent on work/services.
The gig contract may additionally provide for the conditions of increasing the payment of remuneration in the event of certain results or the event of other circumstances.
The amount of remuneration in the gig-contract may be determined in foreign currency.
The law provides grounds and mechanisms for termination of a gig contract, including termination by mutual agreement, expiration, etc., but special attention should be paid to atypical bases:
Each party has the right to terminate the gig contract at its discretion without good reason. However, the agreement may set a different procedure and deadlines. The party who wishes to withdraw from the gig contract is obliged to notify the other party in writing (electronically) no later than 30 calendar days before the scheduled termination date.
2. Termination of the gig contract due to the company’s loss of resident status in Diia City.
In this case, to continue cooperation, it will be advisable to enter into an employment contract or a regular service contract.
Thus, a wide range of grounds for termination of the gig-contract is introduced, which are pretty loyal, both for the resident of Diia City and for the gig-specialist.
On January 1, 2022, Act № 1946-IX on taxation issues in the Diia City regime came into force, which introduced the possibility of choosing the preferential taxation regime for Diia City residents.
The following taxes/fees are set for gig-specialists:
– 5% (instead of 18%) of personal income tax from the gig-specialist’s remuneration;
If the income of the gig specialist is higher than 240,000 euros/year, the rate of 18% is applied to the amount of the excess, and the obligation to declare arises.
– 1.5% military fee;
– 22% of SDRs from the amount of the minimum wage.
The special Diia City mode allows you to sign gig-contracts with foreign nationals. In this case, a resident of Diia City can receive work/services without a work permit for such a foreigner. At the resident’s request, the permit can be obtained voluntarily.
In addition, based on a gig-contract, a foreigner (gig-specialist) can obtain a temporary residence permit in Ukraine.
As a result of providing services/works under a gig contract, intellectual property rights (developments, software, codes, formulas, etc.) may be created. Yes, the intellectual property rights to the object created by the gig specialist belong to the resident of Diia City, unless the gig contract provides other conditions regarding the intellectual property regime. It follows that the resident of Diia City can further use and dispose of the results of the work of the gig specialist, including prohibiting the latter from using their development.
The launch of Diia City took place on February 8, and there are already the first potential residents. Gig-contract is a new form of cooperation, which can be chosen along with the employment contract or contract to provide services/performance of works. The gig contract is characterized by the flexibility of its terms and provides for social guarantees, although it does not equate a specialist to an employee under labor law. We hope that cooperation under such an agreement will benefit future residents of Diia City and gig-specialists.