Government approved package of documents developed by Ministry of Defence to launch Defence City

The Cabinet of Ministers of Ukraine has approved a package of documents developed by the Ministry of Defence to enable the launch of the Defence City special legal regime on January 5, 2026, as a state support instrument for defense industry enterprises.

“The special legal regime supporting Ukraine’s defense industry will be open to enterprises of strategic importance to Ukraine’s defense capability that comply with the established standards and criteria,” Minister of Defence of Ukraine Denys Shmyhal emphasized. 

In particular, the approved procedure for obtaining Defence City resident status sets out the rules for maintaining the register of residents, the submission and consideration of applications for status, and the methodology for calculating the share of defense revenue (qualified income).

Mechanisms for monitoring compliance with the regime’s requirements have been separately regulated. A procedure has been approved to monitor the use of tax-exempt profits, ensuring that such funds are used exclusively for the development of enterprises. A procedure has also been defined for residents’ annual confirmation of compliance with the established requirements.

To reduce security risks to defense production facilities and supply chains, a mechanism for protecting sensitive information has been approved. A Defence City resident may submit an application to the Ministry of Defence identifying public registers and data for which access is to be restricted.

Under a separate decision, the Government approved the procedure governing relocation and the implementation of measures to increase the security of Defence City residents’ production facilities. The document sets out mechanisms for coordination between central and local authorities and addresses issues of financing, monitoring, and reporting. Regional military administrations are required to designate officials responsible for coordinating these processes at the local level within one month. At the same time, overall coordination is ensured by the Ministry of Defence of Ukraine.

A financial framework at the local level has been provided to support the implementation of these measures. The Law of Ukraine ‘On the State Budget of Ukraine for 2026’ provides that 50% of the personal income tax paid by Defence City residents is credited to the special fund of the relevant territorial community’s budget. These funds may be allocated to infrastructure development, relocation support, or measures to strengthen the security of production facilities.