Zelensky signs law to launch Defense City: how special regime for defense companies will work
3 September 2025 21:44
On September 3, President of Ukraine Volodymyr Zelenskyy signed Bill No. 13420, which amends the Tax Code and other laws to create a special legal regime for Defense City for defense industry enterprises, "Komersant Ukrainian" reports.
According to the document, the Ministry of Defense will form and maintain a list of Defence City resident companies that will receive tax and customs benefits, as well as other protection guarantees.
Main provisions of the law:
- The tax benefits will be valid until January 1, 2036: companies will not pay income tax (if it is reinvested in development), land, environmental and real estate taxes.
- Data confidentiality: information about Defence City companies and their reporting will be considered restricted data and protected by law.
- Simplification of procedures: companies will receive easier customs conditions and the possibility of relocating production through the creation of appropriate infrastructure.
- Legal protection: residents will be provided with additional guarantees in criminal proceedings.
Danylo Hetmantsev, Chairman of the Verkhovna Rada’s Finance Committee, explained that the tax benefits are designed for the long term to ensure sustainable conditions for the industry’s development:
“We want the defense industry to have maximum room for development without unnecessary administrative and tax pressure,” he said.
Context
In late June, MPs submitted a package of bills to launch Defence City. Their goal is to support Ukrainian arms producers and make the industry competitive in times of war.
However, these initiatives have sparked debate in society. Some experts and journalists criticized the provision on the possible “immunity” of defense companies from criminal prosecution, as corruption in defense procurement was repeatedly documented during the great war. Subsequently, the head of the Servant of the People faction, David Arakhamia, said that compromises on this part of the legislation were still being worked out.
The defense industry remains one of Ukraine’s key priorities during a full-scale war. In 2024-2025 alone, the state budget allocates more than UAH 1.6 trillion for defense. Ukrainian companies are gradually increasing the production of drones, ammunition, and other equipment, and the government is focusing on developing its own industry to reduce dependence on arms imports and international aid.
