Zelenskyy signs key Defence City laws (updated)
Ukrainian President Volodymyr Zelenskyy has signed key laws introducing tax incentives for defense-industrial enterprises that join the special legal regime Defence City.
This was reported by Danilo Hetmantsev (Servant of the People), chair of the Verkhovna Rada Committee on Finance, Tax and Customs Policy on Telegram.
The Verkhovna Rada’s website later noted that bills No. 13420 and No. 13421 were returned with the president’s signature on September 3.
The Verkhovna Rada adopted the bills on August 21. They are central to implementing the Defence City initiative, which provides a set of incentives for defense-industry companies.
The laws amend the Tax and Customs Codes to simplify operations for defense manufacturers. Key provisions include:
- establishment of the Defence City legal regime until January 1, 2036 (or until Ukraine’s accession to the EU);
- creation of a Defence City Register under the Ministry of Defense;
- clear rules for residents: status, eligibility criteria, and oversight defined by the Law "On National Security of Ukraine";
- a qualified income share of more than 75% required to obtain resident status (50% for aircraft manufacturing).
For enterprises granted Defence City resident status, the laws provide:
- tax incentives (corporate income tax exemption subject to reinvestment, and exemptions from land, property, and environmental taxes);
- simplified customs procedures;
- streamlined export control for military-purpose goods;
- the option for the NBU to set special rules for foreign-exchange supervision;
- support for relocation and enhanced security of production facilities.
At the same time, the National Association of Ukraine’s Defense Industry (NAUDI) had earlier urged MPs not to pass the Defence City bills in their current form and to return them to the lead committee for revision.
NAUDI warned that the adopted bills still risk making the Defence City register operate selectively for chosen companies, as many effective and critically important defense-industry enterprises would be excluded from the list of residents, while the procedure for forming that list remains non-transparent.
Overall, the legislative package establishing "Defence City" initiated by Servant of the People lawmakers Danylo Hetmantsev and Davyd Arakhamiia consists of four bills: Nos. 13420, 13421, 13422 and 13423.
However, bill No. 13423 drew sharp criticism because it effectively grants amnesty for any violations committed during the execution of defense contracts if they were "in the interest of strengthening defense capability." Experts say this would create legal grounds for a lack of oversight and impunity in the sector.
