On September 3, President of Ukraine Volodymyr Zelensky signed Bill No. 13420 on Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Support for Defense-Industrial Complex Enterprises. This document is required to launch “Defence City”, a special legal regime for defense-industrial complex enterprises.
This is stated in the billʼs title card.
The explanatory note states that the Ministry of Defense of Ukraine will create and maintain a list of enterprises of the defense-industrial complex. This should ensure the best conditions for their work.
To protect these businesses, information about their presence on the list, as well as their reporting, will be considered restricted data and protected by law.
The draft law aims to support and develop enterprises of the defense-industrial complex, creating the most comfortable working conditions for them.
The list of enterprises (Residents of “Defence City”) will allow to protect information about them, provide tax benefits, simplify customs procedures and export control.
It also provides additional guarantees of protection in criminal cases and assistance with the relocation of enterprises by creating the necessary infrastructure at the expense of paid personal income tax.
In particular, the chairman of the Verkhovna Radaʼs Finance Committee, the MP from the “Servant of the People” party Danylo Hetmantsev, explained 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;
- no need to pay land tax, environmental tax, or real estate tax.
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 Davyd 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 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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