Defence City residents exempted from property, land tax until 2036 or Ukraine's EU accession – State Tax Service

Companies that are residents of the Defence City special regime will be exempt from land tax and tax on real estate other than land until January 1, 2036, or until the year Ukraine joins the European Union, the State Tax Service of Ukraine (STS) said on Tuesday.

"The exemption applies from the month following receipt of that status and until the end of the month in which it is terminated… These provisions are set out in Law No. 4577 [regarding support for defense-industrial enterprises], which amended the Tax Code of Ukraine. The law entered into force on October 5, 2025; the new rules will operate until January 1, 2036, but not later than the year Ukraine accedes to the European Union," the statement explains.

The STS clarified that the exemption covers land tax for plots on which production facilities used in the business activities of Defence City residents are located, as well as plots temporarily not used in the participants' business activity during relocation and not transferred for use to third parties.

As for the real-estate tax, nonpayment is permitted if the properties are located in the settlement chosen for relocation, are not leased/rented/lent out (except to employees of Defence City participants), and are used in the residents' business activities and/or for housing their employees. The exemption also covers industrial buildings classified as "Industrial and Warehouse Buildings" that, for the relocation period of residents, are not used for their intended purpose and are not leased/rented/lent out.

For Defence City residents, rules on the accrual and payment of penalty interest do not apply when calculating and paying land tax and real-estate tax.

The STS further noted that if a company loses its Defence City resident status it also loses the right to the tax exemptions; an amended tax declaration on land tax and real-estate tax must be filed and the tax liabilities and penalty paid by the 20th day of the month following the loss of status. Penalty interest is charged from the first reporting period after the status was lost, with no statute-of-limitations applied.