Defence City
Defense City: special preferential treatment for defenсe sector enterprises
Ukraine has introduced a dedicated legal and tax regime — Defence City — aimed at accelerating investment into the defence and security sector, expanding domestic manufacturing capacity and fostering the development of advanced military technologies.
Strategic Purpose and Timeline
Defence City is intended to create a predictable and investor-friendly environment for companies engaged in the development, production and servicing of defence-related products and technologies.
The regime will be operational until 1 January 2036 and is expected to apply from the date the first resident is entered into the Defence City Register. The Ministry of Defence of Ukraine acts as the central authority responsible for administering the regime, granting residency status and monitoring compliance.
Eligible Investors and Projects
Defence City is open to Ukrainian legal entities operating in the defence and dual-use sectors, including manufacturers, R&D centres, technology developers and service providers supporting defence production.
To qualify, a company must generate the majority of its revenue from defence-related activities:
The regime excludes entities with links to sanctioned persons, the aggressor state, or entities that fail to meet transparency, tax compliance or national security requirements.
Key Investment Incentives
Corporate Income Tax Relief
Defence City residents may benefit from a corporate income tax exemption, subject to compliance with statutory conditions. The exemption applies to profits derived from eligible activities, excluding controlled transactions and controlled foreign company (CFC) income.
To maintain the exemption, profits must be reinvested into the resident’s business activities in accordance with statutory requirements.
During the exemption period, dividend distributions are generally restricted, thereby promoting long-term capital reinvestment and business development.
Additional Tax Benefits
Depending on the project structure, Defence City residents (other than Diia City residents) may also benefit from exemptions from: