Diia City or a sole trader for an IT company: taxes at three pay levels, the entry conditions and the EUR 1,200 average-pay trap

Diia City entry conditions

Diia City can be compared with a sole trader only once the company qualifies for the regime. Only a legal entity can be a resident, and under Art. 5 of the Law "On Stimulating the Development of the Digital Economy in Ukraine" it must meet all conditions at once and every month:

1. An activity from the law's list is recorded in its charter or in the register: software development and testing, publishing games and software, data processing, cybersecurity, IT education, ICT research and several others.
2. Average monthly pay of employees and gig specialists is at least the equivalent of EUR 1,200 at the NBU rate on the first day of the month. In October 2026 that is UAH 60,859.92 (rate 50.7166).
3. At least nine employees and gig specialists on average over the month. Sole-trader contractors do not count towards this number.
4. At least 90% of income is qualified, that is, from the listed activities.
5. The company is not on the excluded list: a state share of 25% or more, an owner from the aggressor state, tax debt above 10 minimum wages for more than 30 days, bankruptcy, sanctions and so on.

Conditions 2 and 3 together give a floor for the payroll: 9 × 60,859.92 = UAH 547,739.28 a month in October 2026. A smaller team or payroll can stay in the regime only under the rule for young companies, covered below.

Add reporting: six months after entry, a compliance report, and then every year by 1 June an annual report together with an independent auditor's conclusion (Art. 13 of the law). The cost of the audit depends on the auditor, so we do not quote it, but put it into the calculation as an annual expense.

Rates side by side, as of 20 October 2026

The social contribution is the same because in both cases it is the minimum contribution: 22% of the minimum wage of UAH 8,647 set from 1 January 2026 by the State Budget Law for 2026. For Diia City this is the rule in Part 14-1 of Art. 8 of the Law on the Single Social Contribution: the minimum contribution regardless of the amount of pay. The group 3 limit is 1,167 minimum wages; details in the article on the 2026 sole-trader limit.

A calculation at three pay levels

We count taxes on one specialist's pay. For Diia City it is a gig contract with a company that meets all the regime's conditions; for a sole trader it is the same amount paid under a contract. A gig-versus-sole-trader comparison on a single amount of UAH 100,000, with an explanation of who carries the risk, is in the article on a gig contract or a sole trader.

How the UAH 900,000 row was calculated. Over a year that is UAH 10,800,000, which is UAH 708,951 above the group 3 limit. Up to the limit the sole trader pays 5%, on the excess 15%, plus a 1% military levy on all income and 12 minimum social contributions: UAH 741,723.18 a year in total. In Diia City the same income is below the EUR 240,000 limit, so the whole amount goes at 5% + 5%: UAH 1,102,828.08 a year. The limit is exceeded in December, and from the first day of the next quarter the sole trader must move to the general system (Tax Code item 298.2.3). So at this income group 3 works for one year only.

The conclusion on rates is clear: at the level of one specialist a sole trader is cheaper by 4% of pay at any income, as long as income stays under the group 3 limit. Diia City wins elsewhere: lawful management of people as employees, a benefit limit of EUR 240,000 a year and the tax on the company's profit.

The EUR 1,200 threshold trap

The preferential income tax rate and the minimum social contribution do not apply because the company is a resident, but for each month in which it met conditions 2 and 3: average pay of EUR 1,200 or more and at least nine people. If in any month either is not met, under Tax Code item 170.14-1.5 the company tops up personal income tax to 18% at its own expense, and under Part 14-1 of Art. 8 of the Law on the Single Social Contribution the minimum contribution does not apply that month, so the contribution is 22% of pay.

What can spoil a month:

• The exchange rate. The threshold is counted in euros at the rate on the first day of the month. A payroll that had a margin in hryvnias may fall below the threshold after a rate change.
• A new junior specialist. Average pay is an average, so hiring several people with modest pay pulls it down for everyone.
• Unpaid leave and departures. Shrinking the team below nine people on average over a month removes the benefit for the whole month.

So a resident's finance director checks the threshold before every hire and at the start of every month, not once a year in the report.

Entry for a young company

Part 3 of Art. 5 of the law allows a company to become a resident without meeting conditions 2 and 3, but only until 31 December of the year after the year of entry. For this the company must have been registered no earlier than 24 months before the application, and its income must not exceed the group 3 sole-trader limit.

Here a detail matters. The tax rules relieve such a company only of the consequences of not meeting the nine-person condition (Tax Code item 170.14-1.6, the fourth paragraph of Part 14-1 of Art. 8 of the Law on the Single Social Contribution). It must still meet the EUR 1,200 average-pay condition for the preferential income tax rate and the minimum contribution. So a young team of five may pay 5% income tax, but only in months when their average pay is not below the threshold.

What the owner gets

The second half of the decision is the tax on the company's profit. A Diia City resident may choose the tax on withdrawn capital: 9% (Tax Code item 136.8) on distributed profit, that is, on dividends and the other payments listed in item 135.2. While profit stays in the company, this tax does not arise. The ordinary corporate profit tax rate is 18% (item 136.1).

Dividends to an individual are taxed at 5% personal income tax (item 167.5.2). If a resident on special terms paid no dividends for two calendar years in a row, dividends from it are not included in taxable income (item 170.5.5).

A company that works with sole-trader contractors but is not in Diia City can also use the simplified system if its income does not exceed the group 3 limit. How the owner chooses between a sole trader and an LLC is covered in the article Sole trader or LLC.

Decision tree

Our position

For an IT company that meets the conditions with a margin, Diia City is the right choice not because of the rates but because it legalises the real relationship with the team: people work as employees, and the company pays 4% of pay above sole-trader rates and prepares an annual report with an auditor's conclusion. A company hovering near the EUR 1,200 or nine-person threshold is better off not joining: at UAH 150,000 pay, one month with the conditions unmet adds about a third of the monthly payroll to taxes (UAH 50,597.66 per specialist). If the work with contractors is genuinely project-based, a sole trader is both cheaper and more honest.

The position does not hold for companies that need the regime for its other instruments (non-disclosure and non-compete agreements, options, features of corporate governance): then count their value separately. Nor does it account for VAT: a sole trader at 3% with VAT and a VAT-registered company give different figures. The calculation is for one specialist without benefits or leave; for a team's payroll, recalculate with your own amounts.

Verified on 20 October 2026 at zakon.rada.gov.ua: Law No. 1667-IX (Arts. 5 and 13), the Tax Code (items 135.2, 136.1, 136.8, 167.5.2, 170.5.5, 170.14-1, 291.4, 293.3, 293.4, 298.2.3, item 16-1 of subsection 10 of section XX), the Law on the Single Social Contribution (Part 14-1 of Art. 8), the State Budget Law for 2026 (Art. 8), and the National Bank of Ukraine euro rates on 01.01.2026 and 01.10.2026. The arithmetic was recalculated in code. This article is not tax or legal advice.