“Defence City: a new model of defense support and the aviation’s fight for the futureLawmakers are working on amendments to include aircraft manufacturing enterprises in the special regime.
”, — write: unn.ua
DetailsThe Ministry of Defense of Ukraine is introducing new tools to support the defense industry, including the Build with Ukraine and Build in Ukraine initiatives, as well as the so-called “Danish model”. In addition, the launch of a special Defence City regime is being prepared, which should ensure the development of critically important defense industry manufacturers.
It should be noted that the “Danish model” is a mechanism for financing the procurement of weapons for the Armed Forces of Ukraine through reimbursement of contracts with Ukrainian manufacturers, which Ukraine and Denmark introduced in 2024. Under this scheme, the Ukrainian side forms a detailed list of projects that require financing, and Danish specialists conduct a detailed assessment of the capabilities of the recommended companies and analyze their previous experience in fulfilling contracts. The uniqueness of this approach lies in the fact that it not only ensures the prompt supply of necessary weapons to the Ukrainian military, but also creates a powerful incentive for the development of the domestic defense-industrial complex.
“Security and defense are among the main priorities. President of Ukraine Volodymyr Zelenskyy has set clear tasks in this area, which we will consistently implement,” Denys Shmyhal said during the presentation of the Government Action Program project.
The Ministry of Defense also reported that one of the key priorities is to continue strengthening international support, including through interaction with partners through new PURL and SAFE tools. In particular, 18 countries have already joined the SAFE initiative for 150 billion euros, which will be able to participate in arms procurement projects together with Ukraine.
Attention will also be paid to ensuring that at least 50% of funds for armaments go to Ukrainian manufacturers. To this end, the Ministry of Defense will stimulate production development and implement appropriate mechanisms.
At the same time, while Defence City offers new support tools for enterprises working for defense, the aviation industry calls on parliamentarians to take into account its needs and the steps that are critically important today for army aviation to fly its “birds” and perform relevant tasks, for aviation enterprises to modernize production, launch new projects, and preserve tens of thousands of jobs.
“Defence City will not be able to achieve maximum effectiveness without aviation. This is not ‘just an industry,’ it is a strategic advantage that is important not to lose. Our call is simple: give aviation a chance to survive and become the locomotive of post-war recovery,” commented Viktor Popov, President of the Aerospace Association of Ukraine, on the current situation.
The head of the association also noted that narratives sometimes sound in Ukraine as if aircraft manufacturing no longer exists. But this is a direct calque of enemy propaganda, which for decades has been trying to convince us that we “can do nothing.” In fact, Ukraine has all the capabilities and competencies to build aircraft, develop aviation, and move forward. Viktor Popov agrees that after the start of the full-scale invasion, conditions became extremely difficult, many enterprises lost their production bases or were forced to relocate, but he emphasizes that the potential has been preserved, and if the state supports the industry, it will prove its strength.
RecallOn July 16, the Verkhovna Rada of Ukraine adopted in the first reading three key draft laws aimed at introducing a special legal regime for Defence City – to support the domestic defense-industrial complex. The documents provide for tax, customs, and budget benefits for participants of the special regime – until 2036.
At the same time, the aviation industry sounded the alarm due to the disregard of its position in the formation of the Defence City regime, as well as due to overly strict criteria for residents, which even such aviation flagships as “Antonov” and “Motor Sich” would not be able to meet.
According to MP Nina Yuzhanina, the inclusion of major aviation companies in the special regime is considered absolutely necessary.
In turn, MP Mykhailo Tsymbalyuk, commenting on aviation in Defence City, stated that state support is important for enterprises of all forms of ownership, because it is in synergy that they are able to restore Ukraine’s power in aircraft manufacturing.
AddUNN obtained a list of amendments to one of the draft laws on the creation of Defence City, submitted by people’s deputies for the second reading. It is proposed to expand the list of residents by including aircraft manufacturing enterprises that fall under the Law “On the Development of the Aircraft Manufacturing Industry.” This will allow officially including aviation enterprises, defined by the Cabinet of Ministers as critically important for the economy and defense, in Defence City.
Regarding the threshold of income from defense activities, which is the entry point to Defence City, it is proposed to reduce the requirement to 40-50%, take into account annual, not just quarterly income, and include the production and maintenance of aircraft, engines, and components in defense income. Without this, even giants like SE “Antonov” risk being left out of the special regime and losing tax benefits. It is also proposed to include enterprises that participate in international contracts for the export of military or dual-use technologies in Defence City.
In addition, it is about abolishing restrictions on the presence of tax debt, overdue contracts or dividend payments, as in wartime conditions this does not always indicate unreliability. Activities are affected by shelling, relocation and supply disruptions. Instead, it is proposed to allow the inclusion of such enterprises in Defence City provided that the debt is repaid within three years.
Other amendments provide for the expansion of tax benefits for aircraft manufacturing (provided reinvestment), customs preferences for critically important imports, state guarantees, and insurance of export contracts. The conditions for returning benefits in case of loss of compliance with the criteria are also clarified, in particular, the prohibition of retrospective sanctions. The released funds should be directed to production development, modernization, research and development, implementation of new technologies, personnel training, and the acquisition of intellectual property rights in the field of aircraft manufacturing.
Whether the parliament will take into account the submitted amendments regarding the aviation sector remains to be seen. At the same time, delay or disregard for the needs of the industry can have critical consequences: from the inability to ensure the technical serviceability of the Ukrainian Armed Forces’ aviation to the final decline of Ukrainian aircraft manufacturing and the outflow of qualified personnel.