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EBA IT Week. Day 2. The business met with the Deputy Minister of IT Development

01/ 07/ 2021
  During the 2nd day of the IT Week, the European Business Association had the opportunity to talk with Oleksandr Bornyakov, Deputy Minister of Digital Transformation for IT Development. In the Q&A format, Mr. Bornyakov presented information on key projects of the Ministry, which will contribute to the development of the IT sector in Ukraine. Thus, first of all, we talked about Diia.City – the main project aimed at stimulating the development of IT business in Ukraine with a favorable legal and tax regime. In the context of this initiative, Mr. Bornyakov noted that currently, with the joint efforts of the Ministry of Digital Transformation of Ukraine and business, in particular, the European Business Association, draft law №4303 reached finalization and now it looks promising. This draft law has already been adopted in the first reading, and between the first and second readings, the document was amended. The adopted amendments imply the prolongation of the period of effectiveness of Diia.City tax regime - from 15 to 25 years, the improved mechanism of loss of the resident status, withdrawal of norm about non-deception, expansion of the range of eligible activities (NACE), etc.  It is expected that within two weeks the framework draft law №4303 will be voted in the second reading. As for the tax part, this draft law was also adopted in the first reading, and work on its revision continues, in particular within the profile committee of the Verkhovna Rada. It is projected that starting in September, this draft law, with the support of deputies, will be officially adopted. A third draft law is also expected to be submitted, which provides mechanisms for additional protection of resident companies from illegal actions of law enforcement officials. Adoption of these documents will allow companies to send their applications for membership in Diia.City in November-December. In any case, the Ministry still has many tasks ahead such as setting up the infrastructure, settling administrative issues, and so on. So, even in the most optimistic scenario, a full-fledged launch of Diia.City is planned for early 2021. The Deputy Minister and participants also discussed IT education reform. Currently, the Ministry of Digital Transformation together with the Ministry of Education and Science of Ukraine and representatives of IT business is working on the concept of reforming IT education in Ukraine. A working group has been set up under the auspices of the Ministry of Culture by order of Vice Prime Minister of Ukraine Mykhailo Fedorov. It included representatives of the Ministry of Finance, the Ministry of Education and Science, the Office of the President, the Verkhovna Rada, business associations and IT associations, clusters, and public organizations from all over Ukraine. The purpose of the working group is to develop appropriate proposals for modernizing the system of training IT professionals in educational institutions. Together with the Center for Economic Recovery, surveys and proposals from professional associations and market experts are currently being conducted. Its results will help develop a reform roadmap. A working group is expected to meet in mid-July to outline a specific action plan. Also, the business received some details regarding the e-residency initiative. The main goal of the project is to make Ukraine closer to foreigners and create comfortable conditions for remote doing and opening business without a physical presence in the country. The e-resident status will enable the registration of business in Ukraine with competitive tax conditions (as a sole proprietorship) and the use automated services for doing business, such as filing returns and paying taxes. This initiative will increase both budget revenues and help improve Ukraines visibility as a global IT brand. To become an e-resident, it is necessary to apply on the e-residency portal and go through a special procedure. According to the Deputy Minister of Digital Transformation for IT Development, all technical details of the project are being finalized and the promotion of this concept outside Ukraine is beginning. Finally, Oleksandr Bornyakov spoke about draft law №3637 On Virtual Assets, which was adopted in the first reading. The draft covers a quite broad range of issues. Thus, it is not about regulating cryptocurrencies but about creating a legal basis for all virtual acts (both existing and potential ones). To mitigate the negative risks, this draft was developed based on the FATF recommendations. The law does not regulate the level of virtual assets, as well as individuals - it will regulate only service providers (ie if an individual / legal entity wants to exchange/transfer virtual assets, then they need to get a respective permit from a newly established state service). The creation of a new industry aims to increase state budget revenues by involving virtual assets market participants, which will appreciate the opportunities and benefits of working in the relevant legal field, and under a transparent and highly competitive taxation regime (compared to other jurisdictions). The European Business Association thanks Oleksandr Bornyakov for professional discussion of initiatives that are important for the IT market innovations, and openness to cooperation. For its part, the community assures its readiness to work together on priority issues and to participate in the development of effective solutions aimed at the development of the Ukrainian IT industry, education, and the digital image of the country.

During the 2nd day of the IT Week, the European Business Association had the opportunity to talk with Oleksandr Bornyakov, Deputy Minister of Digital Transformation for IT Development.

In the Q&A format, Mr. Bornyakov presented information on key projects of the Ministry, which will contribute to the development of the IT sector in Ukraine. Thus, first of all, we talked about Diia.City – the main project aimed at stimulating the development of IT business in Ukraine with a favorable legal and tax regime. In the context of this initiative, Mr. Bornyakov noted that currently, with the joint efforts of the Ministry of Digital Transformation of Ukraine and business, in particular, the European Business Association, draft law №4303 reached finalization and now it looks promising. This draft law has already been adopted in the first reading, and between the first and second readings, the document was amended. The adopted amendments imply the prolongation of the period of effectiveness of Diia.City tax regime – from 15 to 25 years, the improved mechanism of loss of the resident status, withdrawal of norm about non-deception, expansion of the range of eligible activities (NACE), etc. 

It is expected that within two weeks the framework draft law №4303 will be voted in the second reading. As for the tax part, this draft law was also adopted in the first reading, and work on its revision continues, in particular within the profile committee of the Verkhovna Rada. It is projected that starting in September, this draft law, with the support of deputies, will be officially adopted. A third draft law is also expected to be submitted, which provides mechanisms for additional protection of resident companies from illegal actions of law enforcement officials. Adoption of these documents will allow companies to send their applications for membership in Diia.City in November-December. In any case, the Ministry still has many tasks ahead such as setting up the infrastructure, settling administrative issues, and so on. So, even in the most optimistic scenario, a full-fledged launch of Diia.City is planned for early 2021.

The Deputy Minister and participants also discussed IT education reform. Currently, the Ministry of Digital Transformation together with the Ministry of Education and Science of Ukraine and representatives of IT business is working on the concept of reforming IT education in Ukraine. A working group has been set up under the auspices of the Ministry of Culture by order of Vice Prime Minister of Ukraine Mykhailo Fedorov. It included representatives of the Ministry of Finance, the Ministry of Education and Science, the Office of the President, the Verkhovna Rada, business associations and IT associations, clusters, and public organizations from all over Ukraine. The purpose of the working group is to develop appropriate proposals for modernizing the system of training IT professionals in educational institutions. Together with the Center for Economic Recovery, surveys and proposals from professional associations and market experts are currently being conducted. Its results will help develop a reform roadmap.

A working group is expected to meet in mid-July to outline a specific action plan.

Also, the business received some details regarding the e-residency initiative. The main goal of the project is to make Ukraine closer to foreigners and create comfortable conditions for remote doing and opening business without a physical presence in the country. The e-resident status will enable the registration of business in Ukraine with competitive tax conditions (as a sole proprietorship) and the use automated services for doing business, such as filing returns and paying taxes. This initiative will increase both budget revenues and help improve Ukraine’s visibility as a global IT brand. To become an e-resident, it is necessary to apply on the e-residency portal and go through a special procedure. According to the Deputy Minister of Digital Transformation for IT Development, all technical details of the project are being finalized and the promotion of this concept outside Ukraine is beginning.

Finally, Oleksandr Bornyakov spoke about draft law №3637 “On Virtual Assets”, which was adopted in the first reading. The draft covers a quite broad range of issues. Thus, it is not about regulating cryptocurrencies but about creating a legal basis for all virtual acts (both existing and potential ones). To mitigate the negative risks, this draft was developed based on the FATF recommendations. The law does not regulate the level of virtual assets, as well as individuals – it will regulate only service providers (ie if an individual / legal entity wants to exchange/transfer virtual assets, then they need to get a respective permit from a newly established state service). The creation of a new industry aims to increase state budget revenues by involving virtual assets market participants, which will appreciate the opportunities and benefits of working in the relevant legal field, and under a transparent and highly competitive taxation regime (compared to other jurisdictions).

The European Business Association thanks Oleksandr Bornyakov for professional discussion of initiatives that are important for the IT market innovations, and openness to cooperation. For its part, the community assures its readiness to work together on priority issues and to participate in the development of effective solutions aimed at the development of the Ukrainian IT industry, education, and the digital image of the country.

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