Defence City: Verkhovna Rada prepares for decisive vote
Kyiv • UNN
The Verkhovna Rada is preparing to consider draft laws on Defence City.
The Verkhovna Rada will consider in the second reading a package of draft laws on Defence City – a new tool to support the defense-industrial complex. The special regime should allow increasing weapons production, strengthening defense, and boosting the economy. At the same time, experts warn: without considering strategic industries, particularly aviation, the initiative may leave out a sector that provides equipment modernization, export, and tens of thousands of jobs. Deputies express consolidated support for the domestic aviation industry to ensure it receives proper conditions for development, writes UNN.
Will Defence City become a tool for the development of the defense industry and the economy?
Already tomorrow, August 20, the Verkhovna Rada will consider key draft laws on Defence City in the second reading. This was reported by Danylo Hetmantsev, head of the Verkhovna Rada of Ukraine Committee on Finance, Tax, and Customs Policy.
"The corresponding special regime for defense industry enterprises is being developed so that Ukraine can significantly increase the volume of weapons and defense products production. According to experts' calculations – from 9 to 30 billion dollars annually. We will be able to fully provide our army with the necessary weapons – this is a guarantee of strengthening our protection and defense," Danylo Hetmantsev's message states.
These theses are consistent with the first point of the government's action program – "Security and Defense," where the defense industry is defined as a key driver of development. According to Danylo Hetmantsev, after its adoption in the second reading, Defence City should become a tool that will allow Ukraine to join the circle of leading global arms manufacturers and at the same time stimulate the economy.
In turn, People's Deputy Ihor Kopytin emphasizes that the defense-industrial complex is already an important component of the national economy. He stresses that after the opening of arms exports, envisioned by the Defence City initiative, the military-industrial complex can become one of the main sources of foreign exchange earnings and bring billions of dollars to the state annually.
"The defense industry of Ukraine must take its rightful place in the global arms market and attract billions in investments that will allow scaling up production, investing in new technological developments, and building modernized production facilities. This will provide significant support to both Ukraine's security and defense, and the domestic economy," the parliamentarian noted.
Will aviation remain in the focus of state policy?
For the ambitious goals of Defence City to be realized, a high-quality refinement of the draft laws was critically important, as after the first reading, experts and people's deputies pointed out that the initiative virtually ignored aviation. The industry lost tax benefits that had been in effect for over 10 years as of January 1, 2025, and now considers Defence City the main tool of state support to avoid the fate of the lost space industry.
"If aviation is not fully included as residents, we will have a paradox: a strategically important industry will be outside the scope of state support. And this is a risk of bankruptcies, program shutdowns, and brain drain. On the contrary, the inclusion of aircraft manufacturing will allow preserving production and developing projects such as the modernization of 'Ruslan', the production of An-178, new engines from 'Motor Sich' and 'Ivchenko-Progress', and other outstanding achievements that even not all leading countries in the world can boast of," explained Viktor Popov, president of the Aerospace Association of Ukraine.
Industry representatives emphasize that the preferences that aviation enterprises can receive within Defence City are not state subsidies, but tax exemptions that can return many times over in the form of budget revenues.
"Only in 2017-2023, this system yielded 9.3 billion UAH of released funds, and in return, the state received 22.9 billion UAH in taxes. That is, the effectiveness of tax benefits was 2.5 times, effectively for every hryvnia of tax incentives, the state received 2.5 hryvnias of taxes. Now this support has been cut off, and enterprises are forced to work at their limit, fulfilling defense orders without proper resources," Viktor Popov emphasized.
Viktor Popov also noted that aviation today plays a key role in several areas. For defense – it is the modernization and maintenance of military equipment, logistics, and the development of unmanned technologies. For the economy – export of high-tech products, tax revenues, and investment potential. In addition, the aviation industry provides over 40,000 jobs and creates a multiplier effect for dozens of related sectors.
Aviation through the eyes of deputies: arguments and positions
Anatoliy Burmich, a member of the parliamentary group "Restoration of Ukraine," expressed support for aviation. In his opinion, Ukraine should restore destroyed aircraft factories and modernize the fleet of aircraft that has been idle for years. He considers this direction one of the priorities, as the country has enough specialists and capabilities to independently carry out restoration work, creating jobs, filling the budget, and reducing dependence on external contractors.
"Firstly, Ukraine was and remains one of the few countries that have their own aircraft manufacturing. Despite the fact that many factories are currently destroyed, they need to be restored. Secondly, it is necessary to repair the equipment and aircraft fleet that are currently idle. Before launching them into the sky, they must undergo restoration and repair, because after several years of downtime, they cannot take off immediately. We have all the capabilities and specialists for this, and this is one of the priority areas (...) I believe this is reasonable, and we will support it," Anatoliy Burmich noted.
People's Deputy Petro Yurkchyshyn emphasizes the security component of the aviation industry.
"For us, the main thing is not to lose the aviation industry. After all, when it comes, for example, to shooting down enemy drones like Shahed, this is already a matter of defense and something that directly helps us fight," Petro Yurkchyshyn commented.
Recall
The Aerospace Association of Ukraine explained which amendments the aviation industry proposes to consider within Defence City and why they are critically important.
One of the key issues was lowering the defense revenue threshold for aviation enterprises: instead of 90%, a realistic figure of 50% is proposed, and defense revenue should include not only direct supplies to the Ministry of Defense, but also aircraft production, their repair, modernization, and maintenance. Aviation also insists on including enterprises falling under the law "On the Development of the Aircraft Manufacturing Industry" and already officially recognized by the government as critically important for the economy and defense in the list of Defence City residents.
A separate block concerns tax debts: due to wartime circumstances, many enterprises incurred them, and the association proposes a compromise option – to provide up to three years for their repayment. No less fundamental is the exemption from income tax: the released funds will remain with the enterprises and be directed to research and development – creating new engines, modernizing aircraft, developing unmanned systems, and implementing modern materials and digital technologies.
Additionally, the industry seeks exemption from land, property, and environmental taxes, as well as from fines and penalties in case of exclusion from the list of residents, emphasizing the need for a transparent mechanism for using released funds under government control.
The association emphasizes: without considering these amendments, the aviation industry risks losing its production and human potential, while its support can provide Ukraine with strategic advantages both in the war and in post-war development.