Launch of New Initiative for Ukraine's Defense Industry

The Ukrainian Ministry of Defense has introduced a new package of legislative initiatives aimed at launching a special legal regime called Defence City, effective January 5, 2026. This was reported by the Minister of Defense, Denys Shmyhal.
According to Shmyhal, the Defence City concept represents an innovative model for advancing the defense industry, allowing for swift responses to military needs and attracting foreign investments.
“The main goal is to provide tax incentives in exchange for production development, modernization, new technologies, and research,” stated the minister.
The Ministry of Defense expects that the implementation of this regime will boost the development of leading Ukrainian defense enterprises and create favorable conditions for joint projects with international partners and technology transfer.
“We anticipate the necessary decisions will be adopted at the next Cabinet meeting,” added Shmyhal.
Earlier reports indicated that the Defence City regime includes exemptions from profit tax in case of reinvestment, as well as exemptions from land, property, and environmental taxes, along with the simplification of customs procedures and international transfers of defense products.
In early September, the Minister of Defense announced that President Volodymyr Zelensky signed the laws to implement Defence City.
On August 21, parliamentarians voted for two documents: No. 13420 “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine Regarding Support for Defense Industry Enterprises” and No. 13421 “On Amendments to Section XXI 'Final and Transitional Provisions' of the Customs Code of Ukraine Regarding Support for Defense Industry Enterprises.”