On July 15, the Verkhovna Rada of Ukraine adopted three draft laws as a basis for launching “Defence City”, a special tax and regulatory regime that should support Ukrainian arms manufacturers. These are the tax (No. 13420), customs (No. 13421), and regulatory parts (No. 13422-1).
This was reported by an MP of "Voice" Yaroslav Zheleznyak.
The bills were supported by 283, 284, and 281 votes, respectively. The Chairman of the Finance Committee of the Verkhovna Rada, an MP from the “Servant of the People” Danylo Hetmantsev explains that the bills provide that tax benefits will be valid until January 1, 2036. This means that:
- no need to pay income tax if the company reinvests the money earned in development;
- you do not need to pay land tax, environmental tax, or real estate tax.
In addition, benefits for defense-industrial complex enterprises remain in effect: VAT benefits, accelerated depreciation, and benefits for relocated enterprises and their employees.
Among other things, the draft laws provide for the following additional support:
• simplification of customs procedures;
• simplified export control for military technologies;
• the possibility for the NBU to establish specific features of currency supervision and currency transactions;
• support in the relocation process.
What preceded
At the end of June, MPs submitted several bills to the Verkhovna Rada that are supposed to launch the “Defence City” initiative — a special taxation and regulatory regime. Their goal is to support Ukrainian arms manufacturers. Future Defence City residents will be included in a special List of defence industry enterprises, they will receive tax benefits, will be able to relocate their production using a simplified procedure, they will be allowed to export their products, and information about them will disappear from public registers (in particular, their addresses: the motive is to protect them from Russian missiles).
The MPs also offered arms manufacturers a certain immunity from criminal prosecution. The bill caused great outrage in the media — during the years of the Great War, journalists made dozens of materials about corruption and violations in the procurement of weapons and other defence industry products.
In an interview with Babel, one of the authors of the bill, David Arakhamia, said that compromises will be sought regarding the part on criminal liability.
According to him, it is the criminal procedural component that looks the most scandalous. The head of the Verkhovna Rada Committee on Law Enforcement Affairs Serhiy Ionushas says that the amendments to the Criminal Procedure Code are written crookedly there.
The draft law proposes that a search request be considered together with the person whose house the search will be conducted — this contradicts the very purpose of the search. Then Arakhamia emphasized that Ionushas has already said that he will register an alternative draft in order to have room for maneuver and write everything correctly.
Such an alternative project was registered in the Verkhovna Rada on July 11 ( No. 13423-2 ). The law now provides for a special status for enterprises that are part of Defence City, by increasing and consolidating the role of the Prosecutor General in investigating crimes surrounding such enterprises.
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