Aviation Industry Inclusion in Defence City
The Verkhovna Rada is preparing for the second reading of the Defence City draft laws, which establish a special legal regime to support Ukraine’s defense-industrial sector. Lawmakers are pushing to extend these benefits to the aviation industry — a sector vital for wartime operations and long-term defense capability.
MP Mykhailo Tsymbalyuk noted that while the decision is overdue, its adoption will provide much-needed support to domestic aircraft manufacturing, which has historically been among the world’s leaders.
Proposed Key Amendments
Among the significant proposals under consideration:
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Lowering the Qualified Income Threshold: Reducing the required share of qualified income for aviation industry residents from Defence City benefits to 50%.
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Expanding Eligible Residents: Including entities covered by the Law “On the Development of the Aircraft Manufacturing Industry” and those identified as strategically important.
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Broader Revenue Criteria: Counting both quarterly and annual income and covering activities such as manufacturing, maintenance, and production of engines and components.
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International Cooperation: Adding companies engaged in export of military or dual-use technologies under international contracts.
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Debt Repayment Flexibility: Allowing entry into Defence City despite existing debts if repaid within three years, considering wartime disruptions.
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Customs and Tax Incentives: Extending tax benefits to aviation with reinvestment requirements, providing customs preferences for critical imports, and introducing state guarantees and export contract insurance.
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Flexible Administration: Avoiding retrospective sanctions if enterprises lose preferential taxation status.
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Mandatory Reinvestment: Directing released funds exclusively toward production upgrades, R&D, technology adoption, and staff training.
Strategic Importance and Parliamentary Support
MP Bohdan Kitsak supports the amendments, calling them timely and critical for sustaining the sector. MP Oleksiy Leonov emphasized that only enterprises meeting all requirements will receive benefits, and the Ministry of Defense will assess eligibility.
Leonov also stressed that Ukraine currently produces 40–50% of the necessary weapons, equipment, and related services domestically, and the Defence City framework will help sustain and expand this capacity without unnecessary state pressure.
Background and Challenges
Ukraine’s aviation industry has faced a systemic crisis due to worn equipment, loss of tax privileges, and import challenges, especially for Soviet-era parts no longer manufactured. Experts warn that without legal and financial support, modernization, and transparent procedures, the sector risks losing its ability to ensure combat readiness and strategic stability — including critical missions such as medical evacuation and frontline supply.
