Defence Metropolis has formally launched in Ukraine, providing tax advantages and simplified procedures for protection enterprises. The primary resident is a drone producer, however specialists level to dangers and the necessity to refine the regime.
The particular authorized regime Defence Metropolis, created to scale up protection manufacturing, appeal to funding, and develop Ukraine's defense-industrial advanced, has formally launched in Ukraine. The primary enterprise has already acquired resident standing. UNN investigated what preferences Defence Metropolis resident standing supplies and what the pitfalls are.
What’s Defence Metropolis and who turned a resident
In keeping with the Ministry of Protection of Ukraine, in early January, the primary enterprise acquired Defence Metropolis resident standing – a producer of drones, together with "Vampire" and "Shrike" drones, and interceptors for "Shaheds" that Russia makes use of for enormous strikes on Ukrainian territory.
Defence Metropolis is a component of systemic state coverage within the subject of safety and protection. This authorized regime is meant to create favorable situations for scaling up protection manufacturing, attracting funding, and growing the Ukrainian defense-industrial advanced.
The federal government has been engaged on launching Defence Metropolis because the summer season of 2025. Particularly, on August 21, 2025, the Verkhovna Rada adopted within the second studying and usually two key draft legal guidelines that create the authorized foundation for launching Defence Metropolis – a particular regime to assist the defense-industrial advanced (DIC), particularly draft legal guidelines No. 13420 and No. 13421. On December 17, the Cupboard of Ministers, by decision No. 1745, accepted all key by-laws: the Process for sustaining the Defence Metropolis register; the Process for submitting and reviewing an utility for granting Defence Metropolis resident standing; the Process for monitoring using tax-exempt revenue of a Defence Metropolis resident for the event of its actions; the Methodology for calculating certified earnings ("protection earnings"); the Process for limiting entry to public digital registers concerning info (information) about Defence Metropolis residents; and the Process for submitting and reviewing a report on the compliance of a Defence Metropolis resident.
What advantages do Defence Metropolis residents obtain?
Defence Metropolis residents obtain a posh of financial and operational incentives designed to scale back the fiscal burden and speed up manufacturing improvement.
Among the many tax incentives are exemption from company earnings tax, offered that protection business enterprises reinvest funds of their improvement, in addition to exemption from land, property, and environmental taxes.
As well as, Defence Metropolis residents will profit from simplified customs procedures; particular ensures for info safety and confidentiality of enterprise information through the regime's operation; state assist for relocation and elevated safety of manufacturing amenities if essential.
For a medium-sized protection enterprise with a turnover of €5-10 million, the whole financial savings can attain €500K-1 million yearly. The important thing situation is the reinvestment of launched funds into improvement. Management is exercised by the tax service, which informs the Ministry of Protection about violations. The regime is legitimate till January 1, 2036, or till Ukraine joins the EU – which means with excessive chance 3-7 years, not ten
– believes Dmytro Mykhailenko, President of the Affiliation of Tax Consultants.
To acquire resident standing, a protection business enterprise should submit a corresponding utility and a bundle of paperwork to the Ministry of Protection. This consists of compliance with authorized necessities; monetary and audit experiences, in addition to info on participation within the execution of state protection contracts.
Primarily based on the overview, a choice is made to grant standing, refuse, or return the applying with out consideration. In case of a constructive determination, the corporate is entered into the official Defence Metropolis register.
Pitfalls: Professional Warnings
Dmytro Mykhailenko, President of the Affiliation of Tax Consultants, factors out that regardless of the apparent benefits of the regime, Defence Metropolis has numerous dangers that companies ought to think about from the outset.
The tax authorities will examine the focused use of the launched funds. Formally, the cash ought to go to manufacturing growth, R&D, and gear purchases. Withdrawal into dividends or non-core belongings = lack of advantages + penalties for all the interval of use
– warns Mykhailenko.
As well as, in response to him, the methodology for figuring out "protection earnings" has not but undergone sensible testing.
The primary residents will successfully turn into system testers. The chance is unpredictable interpretations by the tax authorities
– added Mykhailenko.
In keeping with the professional, it also needs to be taken under consideration that after Ukraine's accession to the EU, the Defence Metropolis regime must be tailored to EU state help guidelines, which can considerably change its situations.
Defence Metropolis is created for "enterprises of strategic significance," however the standards for this significance stay obscure. Whether or not medium-sized firms with a turnover of €1-2 million will be capable to get hold of standing, or whether or not the regime will turn into a privilege for chosen high gamers within the business – the approaching months will present
– emphasised Dmytro Mykhailenko.
Partial assist for plane manufacturing enterprises
Amongst those that can declare Defence Metropolis residency are plane manufacturing enterprises. Usually, along with servicing and repairing plane for the army, these firms additionally interact in drone manufacturing.
As UNN beforehand wrote, aviation proposals had been partially taken under consideration within the laws. Together with the primary alternatives that Defence Metropolis opens up for all contributors within the initiative, the aviation business insisted on together with plane manufacturing entities that fall beneath the Legislation "On the Growth of the Plane Manufacturing Trade" and had been designated by the Cupboard of Ministers as critically essential for the economic system among the many residents. These enterprises, particularly, specialize within the manufacturing of engines, parts, and applied sciences which might be concurrently utilized in army and civil aviation. The total listing of those enterprises was not included, however residency was allowed for these whose share of earnings from the protection sector can be not less than 50%.
On the similar time, aviation managed to attain the elimination of a norm that would have turn into a "hidden bomb" for all the protection business: beforehand, it was proposed to oblige firms, in case of shedding Defence Metropolis resident standing, to reimburse all taxes and penalties for earlier years. After discussions in parliament, retrospective sanctions had been eliminated.
Individually, a proposal was thought-about to exclude restrictions on tax arrears and overdue protection contracts. This concerned the potential for together with enterprises with tax arrears within the Listing, offered they’re repaid inside three years, making an allowance for safety dangers, shelling, relocation, provide disruptions, and different components past the producer's management. Within the closing textual content, this criterion was not absolutely taken under consideration, however its necessities had been partially softened.
Regardless of progress, numerous proposals from the aviation group weren’t included within the closing textual content of the legislation. Specifically, initiatives to broaden the grounds for together with enterprises within the Listing of residents weren’t taken under consideration – it was proposed to think about not solely Ministry of Protection contracts, but in addition worldwide agreements within the subject of protection and dual-use. The proposal so as to add financing of analysis and improvement work on plane manufacturing to the areas of use of tax-exempt revenue was additionally rejected. The concept of creating a separate process for using launched funds by plane manufacturing entities by determination of the Cupboard of Ministers of Ukraine (by analogy with CMU Decision No. 476 of 07.06.2017, which was legitimate till 01.01.2025) was not supported both. As well as, the norm concerning the absence of open legal proceedings in opposition to firms was not softened.
"Baptism of fireside" and the necessity for refinements
The launch of Defence Metropolis undoubtedly turned an essential sign for the event of the protection business, nevertheless, the primary months of the regime's operation present that the method of buying residency is shifting considerably slower than the market anticipated. Regardless of the supply of all by-laws and the declared readiness of the state to assist the protection business, as of early 2026, just one enterprise has acquired resident standing.
That is clearly not a few lack of curiosity from companies, however in regards to the extreme complexity of the process itself and overly strict choice standards. For instance, in response to the legislation "On Nationwide Safety of Ukraine," an utility for Defence Metropolis resident standing should embody a report on the compliance of a Defence Metropolis resident, not a candidate for Defence Metropolis resident standing, for the interval from January 1 to December 31 of the corresponding calendar yr, which is inconceivable.
In reality, Defence Metropolis is simply starting to bear its "baptism of fireside" in apply. Nonetheless, it’s already clear that for a lot of medium-sized producers, together with these within the aviation business, the limitations stay a deterrent, even regardless of the apparent monetary advantages.
A separate drawback stays {that a} important a part of the proposals from business communities, together with the plane manufacturing business, had been solely partially taken under consideration or utterly rejected within the closing model of the laws, which can considerably slender the circle of potential residents. Thus, there’s a threat that Defence Metropolis might flip right into a regime for chosen giant gamers and won’t turn into a mass software for the event of the protection business.
It’s apparent that the Defence Metropolis laws wants refinement. This isn’t about altering the idea, however about focused simplification of procedures, clearer residency standards, larger flexibility concerning monetary and formal necessities, and decreasing regulatory uncertainty. With out this, the tempo of recent resident accession and the actual impact for the business might stay very low.