The Aerospace Association of Ukraine is currently collecting proposals for legislative changes regulating the functioning of the tax and customs special regime Defence City from companies operating in the defense industry sector and aircraft manufacturing enterprises. Volodymyr Semenov, the CEO, announced this in an exclusive comment to UNN.
The Aerospace Association of Ukraine is currently consolidating the market's position regarding the functioning of Defence City and preparing a package of proposals for changes to current legislation. We are involving representatives of aircraft manufacturing enterprises, as well as arms manufacturers and other companies related to the defense industry sector that plan to join this special regime, in this process.
He added that the Association is currently collecting and summarizing practical comments from market participants.
Our main goal is to identify norms that prevent enterprises from joining Defence City, create excessive regulatory barriers, or do not take into account the specifics of the work of companies in the defense-industrial complex.
Among the key issues already raised by market participants are the uncertainty of some legislative norms, for example, regarding mandatory audits, the need to clarify compliance criteria, and norms regarding the mandatory absence of criminal proceedings involving potential residents of Defence City.
We see significant potential in Defence City as a tool to stimulate the development of the domestic defense industry and high-tech production, which is especially important now in wartime conditions. But we want to emphasize that the effectiveness of this mechanism directly depends on how well it is adapted to the real operating conditions of enterprises.
Based on the results of this work, the Association plans to submit the developed proposals to representatives of the Verkhovna Rada Committee on National Security, Defense, and Intelligence and to participate in further refinement of the regulatory framework of Defence City in dialogue with the government and parliament.
Recall
The special regime Defence City has started operating in Ukraine. This is an element of systemic state policy in the field of security and defense. This legal regime is designed to create favorable conditions for scaling up defense production, attracting investments, and developing the Ukrainian defense industry.
Defence City residents receive a complex of economic and operational incentives that should reduce the fiscal burden and accelerate production development. This includes exemption from income tax, provided that defense industry enterprises reinvest funds in their development, as well as exemption from land, property, and environmental taxes.
In addition, simplified customs procedures apply to residents; special guarantees for the protection of information and confidentiality of enterprise data during the regime; state support for relocation and increased protection of production facilities if necessary.
An enterprise can obtain the status of a Defence City resident if the legal entity meets the requirements for the share of qualified income (income from the sale of self-produced defense goods or the performance of work and/or provision of services related to defense goods) for the previous calendar year, and there are no circumstances for disqualification of such a person.
The share of qualified income must be at least 75% of the total income of the legal entity (with exceptions) and at least 50% of the total income for aircraft manufacturing entities.
A company registered under the laws of a foreign state or that has violated the requirements for disclosing information about the ownership structure or ultimate beneficiaries cannot be a resident.
An enterprise cannot be included in the register if its shareholders/participants include persons associated with the aggressor state, or against whom sanctions have been applied, or who are associated with a person against whom sanctions have been applied.
Legal entities against whom a violation of obligations under a state contract for defense procurement was established within the last 12 months; who are not income tax payers or are included in the register of non-profit institutions and organizations cannot enter Defence City.
An enterprise cannot become a resident if it has tax debt exceeding 10 minimum wages; if it is located and operates in the temporarily occupied territory of Ukraine, and is also a defendant in criminal proceedings.
The Ministry of Defense announced that the first company received resident status.