Ukraine’s Parliament has passed two key bills (No. 13420 and No. 13421) establishing a “Defence City” legal regime to support the country’s defence industry through 2036, or until EU accession. The regime introduces a new Defence City Register under the Ministry of Defense, replacing the previous list-based system of military enterprises.
Key provisions:
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Resident requirements: At least 75% of qualified income must come from defence contracts (50% for aircraft manufacturing).
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Tax incentives: Exemptions from income tax (if reinvested), land, environmental, and real estate taxes.
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Customs simplification: Streamlined procedures and relaxed export controls for military goods.
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Financial flexibility: The National Bank of Ukraine may introduce special currency supervision measures for residents.
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Security and relocation support: Mechanisms to relocate critical facilities and protect production sites.
The initiative is part of Ukraine’s push to localise arms manufacturing, attract private investment, and secure supply chains under wartime conditions. It mirrors models of special industrial zones in EU states, designed to accelerate production while offering fiscal and regulatory relief.
Controversy:
While the laws were finalised in cooperation with the Ministry of Defense and industry, anti-corruption groups warned they could introduce new risks if oversight remains weak.
Investment signal:
Defence City positions Ukraine as a future defence-industrial hub, offering foreign and domestic investors preferential access to a sector backed by long-term state demand, international procurement projects, and post-war export potential.
