Ukraine Creates “Defense City”: What the largest arms reform since 2022 envisages
8 July 2025 22:26
Ukraine is launching a large-scale legislative initiative in the field of defense technologies called Build with Ukraine, also known as Defense City in the public space. This was reported by "Komersant Ukrainian" with reference to a statement by the head of the Technological Forces of Ukraine, Kateryna Mykhalko.
The project consists of two key bills – #13420 and #13421, which are currently being considered by the tax committee of the Verkhovna Rada. The goal of the initiative is not only to reduce Ukraine’s dependence on external arms suppliers, but also to make military technology a driver of economic development.
Military technology is a strategic asset
The ideologists of Defense City note: own production of weapons is not just a security issue. It is a factor of geopolitical independence. It is defense technologies that allow the state to make independent decisions, form a sustainable economy and influence the rules of global security.
In the coming years, Ukraine should become not only a consumer, but also an exporter of innovative solutions in the field of security technologies – with integration into European defense systems.
What will change: main provisions of the reforms
1. Simplification of military technology exports
New norms will allow companies that work in the field of armaments or dual-use to export products to the member states of the Ramstein format under an accelerated procedure. Key conditions:
- availability of an international agreement with the recipient country;
- payment of a license fee;
- decision within 15 days.
Funds from the fees will go to a special account of the Ministry of Defense and will be used for the needs of the AFU.
2. Tax incentives for defense industry companies
A special regime is envisaged for defense companies for 10 years:
- profit tax exemption (subject to reinvestment);
- zero rate on land, real estate and environmental tax;
- 50% of personal income tax – for the needs of local budgets and infrastructure development.
Read also: Defence City is already at the start: the bills may be considered as early as July 15
From Diia.City to Defence City
One of the key directions is the institutional reproduction of the Diia.City model, which has proven effective in the digital economy. It is assumed that Defence City will have a similar architecture – with transparent rules of the game, investment attractiveness and international integration.
The goal is to make the Ukrainian defense industry not only competitive on the global market, but also capable of rapid modernization and adaptation in war conditions.
Market participants have already submitted a number of amendments to the bills. In the near future, the first reading will be voted on, the second reading is scheduled for late summer. In parallel, the Government is preparing bylaws necessary to launch the new infrastructure.
If successfully implemented, this initiative could become a turning point for the Ukrainian defense economy and turn the country into a full-fledged player in the global market of military technologies.
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