News digest for Diia City residents

Below, you will learn about:

• Guidline on filling the Annex DIIA to the CPT return;
• PIT-consequences for residents of the Diia City: clarification from the State Tax Service;
• Changes to the legal regime of Diia City.
   

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Guidline on filling the Annex DIIA to the CPT return

The State Tax Service of Ukraine has provided clarifications on the aspects of taxation and filling in the Annex DIІA to the Corporate Profit Tax (hereinafter – СPT) return by residents of Diia City (hereinafter - Annex DIIA), who are paying CPT in the form of Exit Tax (hereinafter – ET).

Key points:

• The ET implications of transitional transactions for a Diia City resident have been clarified: when the export of services was carried out during the period when the resident was payer of single tax, and payment was received when he became an ET payer.
  The tax authority informed that there would be no ET payment in such circumstances. This is because the provisions of subpara. 137.10.4.4 of the Tax Code of Ukraine (hereinafter – the TCU) apply to the transactions carried out by a corporate income taxpayer who already has the status of a Diia City resident – an ET payer (clause 1.1 of the Infoletter 4/2024).
• Tips on filling in the Annex DIIA in the case of foreign currency receivables from a non-resident customer booked by a Diia City resident – an ET payer for a period of more than 365 days. This debt should be reported by in the Annex DIIA, in line 24.2 and then in line 24 (clause 1.2 of the Infoletter 4/2024).
  At the same time, only the part of the debt amount that has expired within 365 days, which arose in relation to transactions that took place during the period when the payer was subject to the ET, should be indicated in line 24.2 of the Annex DIIA. (clause 1.8 of the Infoletter 4/2024).
• It is clarified that in case of forgiveness of receivables that arose before the taxpayer switched to the ET, the amount of such debt is included in the ET base as the amount of financial assistance provided to a person who is not a Diia City resident – an ET payer, which is not subject to refund (clause 1.3 of the Infoletter 4/2024).
• It is confirmed that the cost of equipment transferred to a gig-specialist under a gig-contract on a free-of-charge basis (which is used only for work and returned to the Diia City resident after the termination of the gig-contract) is not included in the ET base and is not a VAT base (clauses 1.5, 1.6 of the Infoletter 4/2024).

PIT-consequences for residents of the Diia City: clarification from the State Tax Service

The State Tax Service of Ukraine has commented on the aspects of personal income tax (hereinafter - PIT) and single social contribution (hereinafter – SSC) taxation for residents of Diia City.

Key points:

• It is commented that if payment for the annual paid break of a gig-specialist is a component of remuneration, a Diia City resident may apply PIT rate of 5% (clause 2.4 of the Infoletter 4/2024).
• It was informed to which budget accounts PIT on payments to gig-specialists should be paid (clause 2.1 of the Infoletter 4/2024):
  • PIT on gig-remuneration is paid to budget accounts opened in the name of territorial communities under the budget revenue classification code "11011200" – "Personal income tax on income of specialists of the Diia City resident";
  • PIT on other income of gig-specialists (paid breaks not provided for by the gig-contract, one-time or regular financial assistance, sick leave) is paid under the budget revenue classification code "11010400" – "Personal income tax paid by tax agents on the taxpayer's income other than wages".
• It has been clarified that the amount of systematic financial assistance to a mobilised employee of a Diia City resident (clause 2.3 of the Infoletter 4/2024):
  • is subject to PIT rate of 18%, even if the Diia City resident meets the requirements of "1200 euros", "9 persons" and has no tax debt exceeding 10 minimum wages ^[1];
  • is included in the SSC base (like other incentive and compensation payments), but the minimum contribution is paid on it.
• The issue of the procedure for calculating the "9 persons" criterion was forwarded to the Ministry of Digital Transformation (clause 2.2 of the Infoletter No. 2/2024). The Ministry of Digital Transformation has previously explained the details in its letter dated 20.02.2023 No. 1/11-5-U-385-23-258-2023, by stating that the calculation of this criterion should be guided by the Instruction on the Statistics of the Number of Employees approved by the Order of the State Statistics Committee of Ukraine dated 28.09.2005 No. 286. This means that for the purpose of calculating the "9 persons" criterion:
  • employees who are taking unpaid leave (without pay) are included;
  • employees who are taking maternity leave, childcare leave (until the child reaches the age prescribed by law) are not included.

^{Source: Information letter of the State Tax Service of Ukraine No. 4/2024 "30+ questions* of taxpayers on reporting in the Diia City. Part II"} 

Changes to the legal regime of Diia City

The Ukrainian Parliament has passed a draft law on changes to the legal regime of Diia City in the first reading.

Key aspects:

• regulation of PIT and SSC taxation of salaries and gig-remuneration of specialists working for Diia City startups;
• the possibility to submit an application for the ET along with the application for obtaining the status of the Diia City resident;
• specifying that the first annual compliance report shall be submitted for the period from the first day of the calendar month following the month of obtaining the status of the Diia City resident until 31 December of the relevant calendar year;
• limiting the acquisition of the Diia City resident status to companies whose owners include citizens of the aggressor country.

^{Source: Draft Law on Amendments to the Tax Code of Ukraine and Certain Other Legislative Acts to Stimulate the Development of the Digital Economy in Ukraine No. 9319 dated 23.05.2023}

^{[1] This refers to the requirements set out in paragraphs 2, 3 of Part 1 and paragraph 10 of Part 2 of Article 5 of Law No. 1667.}