Comparative analysis of sole proprietorship 3rd group and "Diia.City" tax regimes as financial instruments for stimulating it industry development in Ukraine

This study provides a comparative analysis of two key taxation models in Ukraine's IT sector: the sole proprietorship (FOP - fizychna osoba-pidpryiemnets) 3rd group and the "Diia.City" special regime. The comparison examines tax criteria, administrative burden, social guarantees, and investment attractiveness. The research uniquely analyzes martial law impacts on both formats, including tax benefits and cooperation restrictions Scientific novelty lies in determining optimal conditions for combining the flexible FOP model with "Diia.City" advantages (low taxes, mobilization reservation, investment opportunities) to ensure IT industry competitiveness. Methodology includes analysis of legal acts, statistics, and expert materials. Research methodology includes analysis of normative-legal acts, official statistics, and expert analytical materials. The comparative framework encompasses tax rates for personal income tax, single tax, military levy, and unified social contribution, as well as corporate profit taxation features. Administrative aspects cover status acquisition procedures, activity volume limitations, and reporting requirements. Social guarantees evaluation includes pension and social insurance, paid leave, and protection during illness or mobilization. Results show FOP maintains relevance for freelancers with minimal tax burden (5% single tax) and flexibility but lacks social protection and scalability. "Diia.City" offers balanced conditions: 5 % personal income tax for specialists, 9 % withdrawn capital tax, gig contracts with social protection, and employee reservation opportunities. During martial law, FOPs received temporary 2 % tax rate support, while "Diia.City" demonstrated growth from ~400 residents in 2022 to ~1,520 in 2024, with tax contributions increasing from 4 to 18 billion UAH. Mobilization reservation became a significant wartime advantage. Investment analysis reveals FOP suits freelancing but limits scaling. "Diia.City" enables investor attraction through corporate structures, stock options, and IP protection. The 9 % withdrawn capital tax encourages reinvestment. Post-war recovery requires a hybrid approach maintaining both regimes. FOPs remain relevant for small projects; "Diia.City" suits business scaling and high-value product development. Recommendations include ensuring legislative stability and implementing differentiated tax rates.