Taxation of residents and experts of the Diia City legal regime and IT sector entities in the Baltic states: A Comparative Approach

Abstract

The article is devoted to a comparative analysis of the tax burden on residents and specialists of the Dіia City legal regime in Ukraine in comparison with tax decisions for IT sector entities in the Baltic countries: the Republic of Estonia, the Republic of Latvia, and the Republic of Lithuania (free economic zones). The study provides a systematic comparison of models of capital gains tax, turnover tax and zonal tax incentives. Particular attention is paid to comparing the fiscal burden on the wage fund. Based on the comparative analysis, significant advantages of the Dіia City legal regime were identified, which consist in a unique combination of relatively low tax rates for residents and attracted specialists and a legally defined guarantee of stability and reliability of the regime over time. In particular, the competitiveness of the tax rate of the Dіia City legal regime on withdrawn capital (9 %) is justified in comparison with the decisions of the Republic of Estonia (22 %) and the Republic of Latvia (25 %). The advantages of the extraterritoriality of the Ukrainian regime over the zonal approach of Lithuania, which requires physical presence and significant capital investments, have been established. At the same time, the article analyses the shortcomings and risks of Dіia City legal regime in the context of martial law. The issue of increasing the military tax rate for specialists is highlighted, which is considered a precedent for state intervention in guaranteeing stable tax conditions. It concludes that despite security challenges, the Ukrainian model remains one of the most fiscally attractive for the IT sector. Ultimately, the combination of a low tax on withdrawn capital, preferential taxation of the payroll fund, and the legally enshrined stability of the regime for 25 years makes the Dіia City legal regime one of the most competitive tax models for IT companies, particularly compared to the highly competitive IT sectors of the Baltic countries. It emphasises the need to study the compliance of the tax model of the Dіia City legal regime with European Union law in the context of European integration processes.