Tax pressure and relocation: why 2025 will be a crucial year for Ukraine’s IT industry?
12 December 2024 19:32
ANALYSIS FROM 
Ukraine’s IT industry remains an important source of foreign exchange earnings and a significant contributor to the state budget. Despite the steady growth of IT services exports in previous years, 2024 was marked by a slowdown. According to the NBU, the export of IT services in January-September this year amounted to $4.78 billion, which is 4.9% less than in the same period of 2023.
How will domestic IT develop in 2025: all the risks and prospects "Komersant Ukrainian" analyzed together with lawyer Anton Volokhov.
The challenges for the Ukrainian IT industry in 2024 were both internal and external. The situation in this type of business is also complicated by global trends affecting the IT industry as a whole, explains lawyer Anton Volokhov.
“The development of the IT industry is affected not only by internal problems caused by the war, increased mobilization and fiscal pressure, but also by global changes in the IT services market. In 2024, the global market had low growth rates, accompanied by a decline in revenues and a restriction on long-term investments in the industry,” Anton Volokhov
Global market challenges
In 2024, the IT services market showed low growth rates due to economic instability and reduced investment in long-term projects. Many international companies have optimized costs by focusing on strategic areas such as cybersecurity, fintech, and artificial intelligence to automate processes. As for small projects and startups, large companies have little interest in the latter.
Volokhov also notes the issue of companies’ competitiveness in the IT services market.
“In the context of cost reduction and optimization, customers often outsource specialists from countries with the lowest wages. That is, the choice was often made in favor of specialists from India, Latin America, Malaysia, and China. At the same time, the competitive advantages of the latter in terms of cost are usually offset by their quality and compliance with deadlines. Nevertheless, the high quality and creativity of Ukrainian specialists remains an advantage that brings clients back to cooperation with Ukrainian companies,” Anton Volokhov
Internal challenges
The key barriers for the Ukrainian IT industry remain the problems associated with the war: mobilization, difficulties with booking employees, restrictions on travel abroad, and power outages. For example, booking only 50% of company employees creates difficulties in forming teams for long-term projects.
“Booking 50% of the staff raises certain issues regarding the possibility of forming a team for a long-term project, and organizing business trips abroad has been and remains something extremely difficult and unpredictable for both the employee and the employer,” emphasizes Anton Volokhov
Additional risks in 2025 may arise due to increased tax pressure.
“An increase in the military fee or the possible abolition of the simplified taxation system for individual entrepreneurs, as well as tight banking control, may lead to a massive outflow of companies and specialists abroad,” Anton Volokhov notes
Potential growth points
Despite the challenges, there are prospects for the Ukrainian IT industry in 2025. Volokhov emphasizes:
“A significant number of innovative projects in the field of Defense Tech, which are being tested in combat conditions, have great investment potential. Also, the development of artificial intelligence and business process automation can become a new driver of the industry,” Anton Volokhov
Ukraine’s IT sector continues to play an important role in the country’s economy, creating jobs, supporting humanitarian initiatives, and remaining competitive even in difficult conditions.
“Despite the global downward trends in the IT services market and a significant number of internal negative phenomena for the IT business in Ukraine, the latter supports the Ukrainian economy, creates new jobs and implements humanitarian initiatives,” Volokhov summarized.
Despite the likely lack of growth, the Ukrainian IT business will not lose its competitive position in 2025 and will be able to surprise with new innovative developments in Defense Tech and AI, the lawyer hopes. The state, in turn, should do everything possible to protect the IT business from pressure and inspections by government agencies.
Author – Anastasia Fedor
