Defense Ministry submits documents to govt to launch Defense City on Jan 5
The Ministry of Defense of Ukraine has submitted a package of regulations to the Cabinet of Ministers of Ukraine, which should ensure the launch of the special legal regime of Defense City—a tool for state support of defense industry enterprises—on January 5, 2026.
"Defense City is expected to facilitate the development of Ukraine's leading defense industry enterprises and pave the way for joint production and technology transfer with our partners. We expect the relevant decisions to be made at the next government meeting," Ukrainian Defense Minister Denys Shmyhal said in a Telegram post on Wednesday.
The Ministry of Defense notes that the Defense City development model for the military-industrial complex is based on the idea of tax support in exchange for the development of production, modernization, new technologies, and research, and allows for a more rapid response to frontline needs and the attraction of international investment.
As reported, on August 21, the Verkhovna Rada supported bills No. 13420 (amendments to the Tax Code) and No. 13421 (amendments to the Customs Code) in their second reading and in full, implementing the Defense City concept. These bills stipulate that the legal regime for Defense City will be implemented by January 1, 2036 (or until Ukraine joins the EU), and that a Defense City registry managed by the Ministry of Defense will be created instead of the existing list of defense industry enterprises.
It is also assumed that the share of a resident’s qualified income should be from 75% (for aircraft manufacturing – from 50%).
Several support instruments are also provided: tax incentives (exemption from income tax subject to reinvestment, land, real estate, and eco-taxes), simplified customs procedures and export controls for military goods, the possibility of the NBU establishing currency oversight regulations, support for relocation, and improved safety of production facilities.
In October, the State Tax Service of Ukraine announced that enterprises-residents in the Defense City special regime would not pay land tax or real estate tax on anything other than land until January 1, 2036, or until the year of Ukraine's accession to the European Union. "The exemption applies from the month following the receipt of such status until the end of the month in which it ceased... These provisions are stipulated by Law No. 4577 [on support for defense industry enterprises], which amended the Tax Code of Ukraine. The law entered into force on October 5, 2025; the new rules will remain in effect until January 1, 2036, but no later than the year of Ukraine's accession to the European Union," the message says.