Entrance to the Ukrainian IT Market: what should you consider?

With over 9,600 registered IT companies and a workforce of more than 300,000 professionals, Ukraine has established itself as a global IT outsourcing hub. Services are exported to 147 countries, led by the United States, the United Kingdom, Malta, Switzerland, Germany, and Israel, where Ukrainian developers are valued for their innovation and high-quality expertise.

The country also maintains a strong talent pipeline, producing over 30,000 IT graduates annually, and boasts a vibrant startup scene with more than 2,600 active ventures that have attracted nearly $1.5 billion in funding. Government initiatives like Diia.City and the Innovation Development Fund further strengthen the legal and tax framework, making Ukraine one of the most attractive IT destinations in Eastern Europe.

What are the most common options for entering the Ukrainian IT market?

Limited liability company (the “LLC”)

The most common way to run a business in Ukraine. An LLC is a separate legal entity, and its participants are only liable up to the amount of their contributions. Registration is quick and straightforward and can be done under power of attorney. An LLC gives complete flexibility for signing contracts, hiring staff, opening bank accounts, and expanding operations.

2. Representative office of a foreign company (the “RO”)

Not a separate legal entity but a subdivision through which a foreign parent company operates in Ukraine. Since September 2024, their registration has been handled by state registrars, and disclosure of the parent company’s beneficial ownership structure is required. If the assets of an RO are insufficient, creditors may bring claims directly against the parent company. As a result, ROs are now used less frequently than LLCs.

Diia.City and its role in market entry

Diia.City is a special legal framework designed for Ukrainian tech companies. Only Ukrainian legal entities can become residents. Representative offices of foreign companies are not eligible to join.

Key features of Diia.City:

• tax benefits;
• focus aimed at supporting the digital economy, including software development, cybersecurity, research and development, and online platforms;
• legal stability provides guarantees against unfavourable legislative changes for 25 years; and
• flexible cooperation allows companies to engage staff under either employment contracts or gig contracts, making collaboration more adaptable to business needs

For complete business operations and client work in Ukraine, companies most often set up an LLC, and then consider joining Diia.City to benefit from its advantages. 

What are the tax differences between different market entry options?

In Ukraine, IT companies may choose between the standard corporate tax regime and the special legal framework of Diia.City. The key differences relate to how the company itself is taxed and how payroll is taxed. For companies operating outside Diia.City, remuneration paid to employees is generally subject to the standard payroll tax burden, including 18% personal income tax, 5% military levy and 22% single social contribution payable on top of the employee’s salary.

Taxation of individuals engaged by IT companies:

This reduced payroll burden is one of the key practical advantages of Diia.City. Compared with the standard employment model, where companies must account for 18% personal income tax, 5% military levy and 22% single social contribution on top of salary, Diia.City allows eligible companies to engage employees or gig specialists under a more favourable tax framework. This makes the regime particularly attractive for IT companies that rely on large teams of specialists and need a predictable, scalable employment model.

What are the main types of IT companies operate in Ukraine?

The Ukrainian IT market is generally structured around several common business models. Understanding how each model typically operates in Ukraine is essential for choosing the appropriate legal structure, tax regime, and approach to engaging specialists.

1. Separate IT department

A common approach for international groups is to establish a Ukrainian entity as an internal IT development centre. In such a structure, the Ukrainian company typically provides software development or support services exclusively (or primarily) to the parent company or other affiliated entities within the group under intercompany service agreements.

This model allows the group to centralise IT functions in Ukraine, benefit from access to qualified technical talent, and maintain operational control over the development process. It is particularly suitable for companies seeking to build a stable long-term team, ensure confidentiality, and retain intellectual property within the corporate group.

In practice, such entities are often structured as limited liability companies and may also consider Diia.City residency depending on their activities and staffing model.

2. Service IT company

Service IT companies are one of the most common forms of IT business in Ukraine. These companies provide software development, IT consulting, quality assurance, and related services to external clients, usually under long-term service agreements or project-based contracts.

This model is characterised by relatively predictable cash flow and the ability to scale operations quickly in response to demand. Ukrainian service companies often work with international customers and operate under export-oriented structures. A key practical focus for such businesses is efficient workforce engagement and contract management, including proper structuring of relationships with specialists.

Depending on the scale of operations and client base, such companies may operate under the standard corporate model or choose to become Diia.City residents.

3. Product IT company

Product IT companies develop and commercialise their own software products, mobile applications, or other digital solutions. Unlike service companies, product businesses focus on building intellectual property and scaling the product through licensing, subscriptions, or direct sales.

In Ukraine, product companies typically place significant emphasis on intellectual property structuring, ensuring that all rights to software and related developments are properly assigned to the company. This is particularly important when teams include both employees and independent contractors. Such businesses may also consider Diia.City as a framework supporting flexible engagement models and enhanced legal tools tailored to the digital economy.

This model is often chosen by startups and innovation-driven companies aiming to grow internationally and attract external investment in the long term.

How to protect intellectual property rights in IT?

Summary of protection mechanisms

Copyright

Software code and related materials are protected by copyright automatically upon creation, provided they are original. Although registration is not mandatory, registration with the Ukrainian National Office for Intellectual Property and Innovations provides additional evidentiary value in case of disputes.

Licensing

Licensing enables the IP owner to grant third parties the right to use the software under defined conditions. Licence agreements may be exclusive or non-exclusive and typically regulate the scope of permitted use, distribution, and modification.

Patent protection

Patent protection may be available where software includes a technical solution meeting patentability criteria. Purely abstract algorithms without a technical effect are generally not eligible for patent protection.

Trademark protection

Trademark registration protects elements that distinguish a product or service in the marketplace, such as names, logos, or slogans. Ukrainian trademark protection is renewable indefinitely as long as use continues.

Domain name protection

Securing relevant domain names protects the online identity of software products or platforms, preventing others from registering and using the same domain.

Contractual measures

Confidentiality agreements (NDAs), clear work-for-hire clauses, and comprehensive IP assignment clauses in contracts with employees and contractors reinforce legal control over IP.

What are the options for engaging developers under Ukrainian law?

Ukrainian IT companies can structure cooperation with developers using four key models: employment contracts, civil law agreements, gig contracts, and contracts with private entrepreneurs. These models vary in legal nature, flexibility, and suitability depending on whether the company is a Diia.City resident, and whether the developer is local or foreign.

In conclusion, Ukraine offers a well-developed IT ecosystem supported by a strong talent pool, an export-oriented market structure, and a legal framework that allows businesses to choose between standard corporate models and the special Diia City regime. Entering the Ukrainian IT market requires careful selection of the appropriate legal form, engagement model for specialists, and a clear approach to IP ownership and protection. When structured properly, Ukrainian operations can provide both operational flexibility and a stable platform for international growth.

Authors:

Oleksandr Melnyk, Partner at GOLAW, Head of Corporate Law and M&A practice, Attorney at law

Vladyslava Zaichko, Junior Associate at Corporate Law and M&A practice at GOLAW