Draft laws are currently under consideration in the Verkhovna Rada, which propose the establishment of a special legal regime known as Defence City. Its aim is to introduce new taxation and state support mechanisms for enterprises in the defense industry (DI), similar to the already functioning Diia.City regime.
This is reported by Finway
Tax and Regulatory Incentives for the Defense Industry
According to the proposals, until January 1, 2036, enterprises operating within Defence City will be able to benefit from the following incentives:
- Exemption from profit tax provided that the received funds are reinvested;
- Exemption from land tax;
- Cancellation of property tax;
- Exemption from environmental tax.
Additionally, existing tax preferences for defense industry enterprises will remain in place, including: VAT exemptions, accelerated depreciation, and special benefits for employees at relocated enterprises.
Additional Guarantees and Support for Defence City Participants
Enterprises that join Defence City will have the opportunity to take advantage of a range of additional incentives and guarantees. Among them:
- Simplification of customs procedures for imports and exports;
- Simplified export control for military technologies;
- Additional guarantees of protection within the criminal process;
- Assistance in relocating enterprises to safe regions;
- The possibility for the National Bank of Ukraine to establish specific currency supervision features and conduct currency operations.
“It is proposed that until January 1, 2036, the following benefits apply to defense sector enterprises: exemption from profit tax provided that reinvestment occurs, exemption from land tax, exemption from property tax, and exemption from environmental tax”.
Furthermore, the parliamentary financial committee is initiating an expansion of the state program “Affordable Loans 5-7-9%” to finance defense industry enterprises. It is also planned to improve the loan acquisition process for defense enterprises, which is expected to contribute to the development of the domestic defense industry and enhance its competitiveness.