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IT companies address the President of Ukraine

28/ 08/ 2020
  Over the past month, several draft laws on reforms in the IT industry have been registered in the Verkhovna Rada. Even though these initiatives could bring positive changes for Ukrainian IT, the current version of the drafts does not cover important issues for the industry. The service industry, which accounts for more than 70% of Ukraines IT market, has repeatedly emphasized its red lines in the media and shared its thoughts and recommendations on how to effectively improve the competitiveness of the IT sector. Therefore, the IT industry, united by the IT Committee of the European Business Association and other major business associations, sent an official letter to the President of Ukraine, proposing to jointly develop a quality document, rather than multiplying initiatives for further development of the industry. The following 9 aspects are particularly important for the industry: provide for the declarative principle of joining the special legal regime for the IT industry, as well as ensure transparency and predictability of legal regulation, prevent an increase in the regulatory burden or the creation of additional regulators in the IT industry; guarantee the invariability of tax rates and fees when using a simplified taxation system in the IT industry. We consider it appropriate to keep the existing mandatory payments for IT professionals who are registered as FOPs, namely: the personal income tax at 5% rate and a single social contribution of 1 minimum wage; provide for individuals, who are employed at IT companies, the possibility of applying the personal income tax rate of 5 percent and a single social contribution of 1 minimum wage; establish a special legal regime for a period of 15 years, and clear conditions for automatic prolongation of the regime; guarantee the IT companies the possibility to freely and equally choose the forms of cooperation with IT specialists: based on concluding agreements with FOPs or by hiring IT specialists based on the employment contract. After all, the design principle of the industry and its dynamic nature is much better suitable to the entrepreneurial cooperation than to the full-time employment of IT specialists. Most IT companies hire IT-professionals, as entrepreneurs, not employing them as the companys staff on a contract basis. In this context, it is necessary to eliminate the risk of transforming cooperation with FOPs (individual entrepreneurs) into permanent labor relations. Accordingly, it is important to ensure the confidence of the IT business that it will not be prosecuted for the cooperation with IT professionals who are registered as FOPs; ensure the possibility of using a special contractual form of relations between IT companies in and their employees, which will be more flexible than that provided by current labor legislation; strengthen the protection of IT business in the legislative context from potentially illegal actions of law enforcement agencies and promote the protection of property rights; simplify the procedures for obtaining immigration permits to Ukraine for foreign IT specialists; develop mechanisms of public-private partnership in the field of education, the formation of the state demand for new graduates in the IT industry, as well as to ensure the improvement of the quality of education in the IT industry. Today, the IT industry is more united than ever and working together on useful and innovative initiatives that will improve the functioning of IT, especially given the global crisis due to the pandemic. We hope that the authorities will hear the voice of business and the result of the dialogue will be the creation of a single effective document for all parties!   Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

Over the past month, several draft laws on reforms in the IT industry have been registered in the Verkhovna Rada. Even though these initiatives could bring positive changes for Ukrainian IT, the current version of the drafts does not cover important issues for the industry. The service industry, which accounts for more than 70% of Ukraine’s IT market, has repeatedly emphasized its “red lines” in the media and shared its thoughts and recommendations on how to effectively improve the competitiveness of the IT sector.

Therefore, the IT industry, united by the IT Committee of the European Business Association and other major business associations, sent an official letter to the President of Ukraine, proposing to jointly develop a quality document, rather than multiplying initiatives for further development of the industry. The following 9 aspects are particularly important for the industry:

  1. provide for the declarative principle of joining the special legal regime for the IT industry, as well as ensure transparency and predictability of legal regulation, prevent an increase in the regulatory burden or the creation of additional regulators in the IT industry;
  2. guarantee the invariability of tax rates and fees when using a simplified taxation system in the IT industry. We consider it appropriate to keep the existing mandatory payments for IT professionals who are registered as FOPs, namely: the personal income tax at 5% rate and a single social contribution of 1 minimum wage;
  3. provide for individuals, who are employed at IT companies, the possibility of applying the personal income tax rate of 5 percent and a single social contribution of 1 minimum wage;
  4. establish a special legal regime for a period of 15 years, and clear conditions for automatic prolongation of the regime;
  5. guarantee the IT companies the possibility to freely and equally choose the forms of cooperation with IT specialists: based on concluding agreements with FOPs or by hiring IT specialists based on the employment contract. After all, the design principle of the industry and its dynamic nature is much better suitable to the entrepreneurial cooperation than to the full-time employment of IT specialists. Most IT companies hire IT-professionals, as entrepreneurs, not employing them as the company’s staff on a contract basis. In this context, it is necessary to eliminate the risk of transforming cooperation with FOPs (individual entrepreneurs) into permanent labor relations. Accordingly, it is important to ensure the confidence of the IT business that it will not be prosecuted for the cooperation with IT professionals who are registered as FOPs;
  6. ensure the possibility of using a special contractual form of relations between IT companies in and their employees, which will be more flexible than that provided by current labor legislation;
  7. strengthen the protection of IT business in the legislative context from potentially illegal actions of law enforcement agencies and promote the protection of property rights;
  8. simplify the procedures for obtaining immigration permits to Ukraine for foreign IT specialists;
  9. develop mechanisms of public-private partnership in the field of education, the formation of the state demand for new graduates in the IT industry, as well as to ensure the improvement of the quality of education in the IT industry.

Today, the IT industry is more united than ever and working together on useful and innovative initiatives that will improve the functioning of IT, especially given the global crisis due to the pandemic. We hope that the authorities will hear the voice of business and the result of the dialogue will be the creation of a single effective document for all parties!

 

Be the first to learn about the latest EBA news with our Telegram-channel EBAUkraine.

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