Obtaining Defence City Resident Status

This regime was introduced by Law of Ukraine No. 4577-IX dated 21 August 2025 (came into force on 5 October 2025), which amended the Tax Code of Ukraine.

If you operate in the defence industry sector (developing or manufacturing unmanned systems, electronic warfare (EW) and reconnaissance equipment, weapons, related components, defence software, etc.), the Defence City regime gives you access to a range of incentives and regulatory reliefs. These include tax incentives, simplified customs procedures, streamlined export controls and other benefits.

Obtaining resident status requires submitting an application in the prescribed format together with a defined set of documents. Inaccuracies, missing documents or other deficiencies may result in the application being returned without consideration or in a refusal to grant the status. Once the company becomes a resident, it must regularly submit a compliance report to the Ministry of Defence together with an assurance report prepared by an audit firm. It must also maintain proper accounting records and correctly document source records and agreements. We recommend approaching the registration process and ongoing documentation requirements carefully and seeking professional support where necessary.

Forvis Mazars team provides comprehensive support to defence industry companies. We help businesses obtain Defence City resident status, apply the available tax and regulatory incentives and confirm their ongoing compliance with the requirements of the regime.

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Who can become a Defence City resident

Companies that support Ukraine’s defence and national security needs may qualify for resident status. These include manufacturers of weapons, ammunition, military equipment, unmanned systems, electronic warfare and reconnaissance equipment, as well as subcontractors supplying materials, components and parts to Defence City residents for the manufacture of their own defence products. IT companies developing software for the defence sector may also qualify for resident status.

Share of qualifying income: at least 75% (at least 50% for aircraft manufacturing)

The company must also meet the following qualifying income requirement:

• qualifying income must account for at least 75% of the legal entity’s total income, except as provided below;​
• qualifying income must account for at least 50% for aircraft manufacturing entities* (development, production and repair of aircraft and aircraft engines).​

* Companies meeting the criteria set out in Article 2 of the Law of Ukraine “On the Development of the Aircraft Manufacturing Industry”

The company must also have no circumstances preventing it from obtaining Defence City resident status. Such circumstances include the legal entity being registered outside Ukraine or included in the Register of Non-Profit Institutions and Organisations; outstanding tax liabilities or unpaid Unified Social Contribution; the presence of persons from an aggressor state among its owners; the company being declared bankrupt; and other circumstances provided for by law.

What benefits does Defence City resident status offer 

Defence City residents can benefit from tax and other incentives, including:

• exemption from corporate income tax, except for taxable items related to transfer pricing and controlled foreign company (CFC) profits;
• exemption from land tax and from tax on immovable property other than land plots. The exemption applies from the month following the month in which resident status is granted until the end of the month in which the status is terminated;
• exemption from environmental tax. The exemption applies from the tax period following the period in which resident status is granted until the end of the tax period in which the status is terminated;
• customs incentives, including simplified export of military goods;
• easing of foreign currency restrictions imposed by the National Bank of Ukraine;
• restricted access to information in public electronic registers;
• the ability to relocate and implement measures to enhance the security of Defence City residents.

🔴 It is important to remember that not all benefits apply automatically.

Legal and tax support for Defence City resident status from Forvis Mazars

Forvis Mazars team provides comprehensive support to defence industry companies. We can help you:

• assess whether your company meets the eligibility criteria;
• prepare an action plan to meet the criteria and evidence compliance for entry into the Defence City regime;
• provide step-by-step guidance for entering the Defence City regime;
• obtain Defence City resident status;
• support you in meeting the requirements of the special regime and prepare the required reporting;
• apply the available tax and regulatory incentives;
• support your interactions with government authorities;
• prepare the compliance report.

Step-by-step procedure for obtaining resident status

To obtain Defence City resident status, a company must complete several consecutive stages, from assessing its compliance with the relevant criteria to being entered in the Register.

Eligibility review

The company must confirm that it meets the requirements of Article 37 of Law No. 2469-VIII and achieves the required share of qualifying income. This involves analysing its income structure, business activities and supporting documents.

Preparation of the document package

At this stage, the application and a document package are prepared: a compliance report in the prescribed form with annexes, documents confirming the information stated in the application, and documents confirming the absence of outstanding liabilities to the state budget.

Submission of the application to the Ministry of Defence

The documents may be submitted to the Ministry of Defence by post, signed by the company’s director or an authorised representative. They may also be submitted by email using the qualified electronic signature (QES) of the director or authorised representative.

Review of the application (up to 10 business days)

The Ministry of Defence reviews the application and decides whether to grant resident status within 10 business days. It may also deny resident status or return the application without consideration.

Granting of status and inclusion in the Register

When granting resident status, the Ministry of Defence simultaneously enters the relevant information in the Defence City Register. The applicant receives an extract from the Register together with the decision granting resident status.

Documents required for the application

1. application in the prescribed form;
2. power of attorney or a certified copy of it, if the documents are submitted by an authorised representative;
3. compliance report for the previous year to confirm qualifying income, prepared in the prescribed form with annexes and necessarily accompanied by an assurance report issued by an audit firm;
4. other documents supporting the information stated in the application;
5. certificate confirming the absence of outstanding liabilities, or an extract from the information system of the State Tax Service of Ukraine on the taxpayer’s settlements with the budget and target funds, certified by the company’s director;
6. other required documents.

Defence City or Diia.City 

The Defence City and Diia.City regimes are intended for different industries. A legal entity may hold resident status in both Defence City and Diia.City at the same time. However, if a Defence City resident also holds Diia.City resident status, the tax incentives provided under the Defence City regime do not apply: corporate income tax, environmental tax, land tax and tax on immovable property are charged on a general basis. Such companies must also submit two separate reports and two assurance reports prepared by audit firms.

You can find more details comparing the two regimes in our guide Diia.City or Defence City: how to choose.

Our team can also help you assess whether Diia.City or Defence City is more appropriate for your business, compare the applicable tax burden, provide step-by-step guidance and support your company throughout the process of joining the selected regime.

FAQ

Why choose Forvis Mazars

Forvis Mazars team provides comprehensive support to defence industry companies, Defence City residents and international companies establishing or expanding their manufacturing presence in Ukraine. You will work with experts who have more than 15 years of experience in tax and legal advisory.

We support companies at every stage, from market entry and the launch of manufacturing operations to day-to-day activities and business expansion. This gives us a strong understanding of the specific challenges facing your business.

You can receive comprehensive support with Defence City residency, from obtaining resident status to preparing the required reports and managing ongoing reporting obligations.

Would you like support with obtaining Defence City resident status, or do you have additional questions? Complete the enquiry form, and our experts will contact you.