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Ігор Вишневський Weapon
19 January 2026, 09:00
2026-01-19
Why aren't all defense companies lining up to join Defence City quickly? The position of TAF Industries, Blue Bird, Himera, L7 and others
Since the beginning of 2026, Ukraine has been operating a special tax and legal regime, Defence City, launched specifically for companies engaged in the production of defense products. In the second half of last year, many politicians presented it as a great boon for the Ukrainian defense industry, but as of mid-January, most miltech and deftech companies, despite all the promised «bonuses», are only eyeing the opportunity to join this special regime.
Since the beginning of 2026, Ukraine has been operating a special tax and legal regime, Defence City, launched specifically for companies engaged in the production of defense products. In the second half of last year, many politicians presented it as a great boon for the Ukrainian defense industry, but as of mid-January, most miltech and deftech companies, despite all the promised «bonuses», are only eyeing the opportunity to join this special regime.
Already in the first days of the new year, on January 2, the press service of the Ministry of Defense announced the first resident of Defence City — the manufacturer of Vampire drones and other UAVs, SkyFall. At the same time, there have been no reports of other market players joining the special regime since then.
dev.ua asked a number of companies that manufacture defense and dual-use products whether they are also going to use the special regime. Most of them are already on this path or in the process of legally studying the issue. At the same time, some of them also express cautious doubts about the feasibility of this, especially if the company is already a resident of another special tax regime — Diya.City. Here is what the companies answered us.
«We look at Defence City pragmatically»
Olena Dushyna, head of the L7 miltech group, which includes developers of firefight simulators, calls the launch of Defence City the right and long-awaited step for the defence and miltech sector.
She sees security as one of the main positives of the special regime. «Companies working in the defense sector should not disclose sensitive data about the structure, locations, production or personnel. A regime that allows protecting this information at the state level is a basic but critically important thing that the market has long lacked. Therefore, from a security point of view, Defence City is a very strong first step that closes the systemic risk for enterprises in the sector,» Olena Dushyna expressed her opinion in a comment to dev.ua.
Olena Dushyna, photo from her Facebook
Despite all the positives, the head of the L7 miltech group notes that joining Defence City specifically for them currently seems like an ambiguous step.
«We look at Defence City pragmatically, taking into account the real structure of our group. Some of our companies are already residents of „Diya.City“, and for us today it is an effective tool, not just a special regime. Our key product is a software and hardware complex (combat simulator), where a significant part of the value is created precisely as an IT product. Therefore, residency in „Diya.City“ is absolutely legitimate and logical for us,» says Dushyna.
She emphasizes that «Diya.City» has a number of advantages for the L7 miltech group:
pay a completely white, official salary,
to be competitive in the market of engineers, developers and R&D teams,
provide transparency and stability for people.
«And this is fundamental, because the miltech market today, in terms of salaries, already goes beyond the classical IT market. If the state wants miltech manufacturers to stay in Ukraine, scale up and pay taxes here, the mechanisms for legal and transparent labor remuneration must be competitive. It is „Diya.City“ that provides such an opportunity today. Defence City does not yet have this tool — and this is an important area for improvement,» Olena Dushyna emphasized.
In her comment, Dushyna also reported that in 2026 they are preparing to enter into long-term state contracts with the Ministry of Defense, which would allow them to obtain the status of a critical enterprise in the defense industry, and, as a result, 100% booking, but today the situation in the L7 miltech group is different.
«We work directly with military units and subdivisions that come with urgent requests: ‘we need it yesterday — to deliver, refine, or develop.’ We do it. Our contracts are short — often up to three months, because war does not allow us to wait. But it is precisely because of the short-term nature of the contracts that we formally cannot obtain criticality for 100% booking, although in essence we work in miltech and directly for the military,» she criticized the current state of affairs.
In this context, she called the 50% booking they have through «Diya.City» a working compromise, but not an ideal solution.
As Olena Dushyna says, Defence City is the right foundation, but for companies to enter there en masse, they need to «move further.» In her opinion, for this, the special regime lacks a competitive model of payroll taxation similar to «Diya.City»; more flexible mechanics for determining criticality for companies with short-term but regular contracts; and mechanisms that allow directing the released financial resources to accelerate R&D and scale development, rather than being limited to the fiscal effect alone.
Among the advantages of Defence City, Olena Dushyna singled out the export prospect as the main advantage. «The Ukrainian market is certainly a priority, and we still have a great potential for coverage within the country. But our production capacities already exceed domestic demand, and the possibility of legal export of simulators and solutions abroad is a huge chance for the entire sector,» explained the head of the L7 miltech group.
Olena Dushyna concluded that if Defence City provides «working export mechanics,» it will allow companies to stay in Ukraine, scale production, pay more taxes, and invest more in development. «Defence City is the right first step for defence and mil-tech. But for companies to come there en masse, the regime must provide not only security, but also competitive conditions for people, development, and exports,» Dushyna concluded.
«A final decision on the transition has not yet been made»
General Counsel of Himera, Kateryna Bumaga, explains in a comment to dev.ua that Himera is currently at the stage of studying the possibilities and conditions for obtaining Defence City residency, in particular, the published drafts of subordinate regulations.
«We analyze whether our activities meet the established criteria, and also assess the extent to which the status of a Defence City resident will be able to fully meet the operational and production needs of the company. For us, it is fundamental that the chosen model of the legal and regulatory environment allows us to organize the production of products as efficiently as possible to meet the needs of the Security and Defense Forces of Ukraine,» she says.
Kateryna Bumaga, photo of TSU
According to Kateryna Bumaga, Himera does not refuse the possibility of operating in the Defence City mode and considers this model as a potentially useful tool for companies that work for the needs of the Security and Defense Forces, in particular from the point of view of scaling production capacities.
«At the same time, a final decision on the transition has not yet been made. We are currently at the analysis stage — we are assessing how effective this model will be for our company, taking into account the current stage of development, operational structure and production processes. After completing the internal assessment, we will be able to form a balanced position on the feasibility of the transition,» says the General Counsel of Himera.
According to the lawyer, for Himera, among the potential advantages of the Defence City regime, the most significant is the simplification of exports. At the same time, within the framework of the current analysis, the company again draws attention to the issue of the compatibility of the Defence City regime with other special regimes, in particular «Diya.City».
«It is important for technology companies to be able to combine support tools without losing already acquired preferences, since it is precisely such a combination that can provide the maximum effect for the development of production and innovation,» Kateryna Bumaga is convinced.
«In Defence City, secrecy will be treated on a different level»
According to Valery Zarubin, founder of the Blue Bird company, known for producing the Chuyka drone detector, electronic warfare systems, and other products, the manufacturer’s team has been studying the topic of possible joining the Defence City special regime for the past week.
«The last meeting regarding joining Defence City took place within our team just yesterday. We talked about what it is, how it works, and who joined it,» Valery Zarubin explained in a comment.
Valery Zarubin
The founder of Blue Bird also added that the team intends to participate in a separate event on this occasion, which will take place soon and where the topic of joining Defence City will be discussed in more detail.
Among the advantages of the special regime, he highlighted closer interaction with the state, a kind of «state partnership», and the transparent work of residents of such a special regime.
«That is, this is the most white-collar work, although we already work according to this principle and even arrange internal audits for ourselves. That is, there will have to be constant audits, the state supervises the company, but at the same time the company receives preferences, and the state sees the company as a clean, transparent partner, and, accordingly, has contracts with it,» Valeriy Zarubin noted in a comment to dev.ua.
According to him, Blue Bird is «absolutely considering» the possibility of joining Defence City, and the example of SkyFall «forces us to emulate it.» At the same time, Zarubin emphasized that everything he knows about Defence City is the result of internal discussions of this topic with the team, so in general it requires more systematic further study.
Separately, the founder of Blue Bird also highlighted the issue of the secrecy of the Defense City mode, which allows sensitive information to be kept secret from the enemy, calling it a great positive.
«A company that joins such a program becomes „invisible“. Unnecessary information disappears from free access, and I consider this super-critical. At a minimum, many of these people, for whom this or that company is registered, are in the field of view of the FSB, and such people can be hunted. I don’t think that we ourselves should help in this intelligence of our enemy,» Valery Zarubin summed up, adding that he hopes that secrecy will be treated at a different level at Defence City.
«Currently, active preparations are underway»
Director of Defense Enterprise Development and Air Force Reserve Officer Anatoliy Khrapchynsky believes that the Defense City regime has become an important step for the development of the Ukrainian defense industry, as it creates predictable tax and regulatory conditions and allows manufacturers to plan for scaling in wartime.
«It is significant that among the first residents is the manufacturer of Vampire drones, the SkyFall company, because it was private companies that were the key drivers of the launch of this regime,» he says in a comment to dev.ua.
Anatoly Khrapchinsky, photo from his Facebook
Speaking about his company, Khrapchinsky notes that it also plans to become a resident of Defence City. «For me, this is not a formality — I personally participated in the preparation and discussion of certain legislative changes and I understand well why this regime is critically important for the development of the private defense industry,» he recalled.
Anatoliy Khrapchinsky shared that his company is currently actively preparing for this step: a package of applications is being formed, internal processes and compliance are being aligned, and proposals are being developed to refine the regime, taking into account practical challenges that arise during scaling and mass production.
«For us, as a manufacturer of a wide range of defense products, Defence City is primarily about systemic advantages: predictable tax and customs conditions, accelerated regulatory procedures, simplified import of components, and clear interaction with the state,» he assured.
The representative of the defense enterprise also summarized that, overall, the special regime will allow for faster product launch, scale production, and invest in R&D without constant regulatory risks.
«The key problem is the fragmentation of the regulatory regulation of the Defence City regime»
In response to a request from dev.ua, TAF Industries explained that they are considering the possibility of joining the legal regime of Defence City, but taking into account the current status of the resident of «Diya.City», they are approaching this issue extremely carefully.
«Today, there are a number of both practical and legal aspects that indicate not only the limited feasibility of such a step, but in some cases also potential risks,» the company says.
Photo from the TAF Industries website
TAF Industries believes that the key problem here is the fragmented regulatory regulation of the Defence City regime.
«To date, a complete package of laws and bylaws has not been adopted that would comprehensively regulate the activities of defense sector enterprises. The issue of exporting products remains particularly critical, including procedures, permits, currency regulation, and interaction with government agencies,» the manufacturing company noted.
TAF Industries emphasizes the lack of clear and stable rules in this area, which significantly complicates strategic planning and business scaling.
Nevertheless, the company still believes that the Defence City regime provides a number of attractive tax incentives, including:
exemption from corporate income tax, although with significant restrictions on the procedure and directions for using such profits;
exemption from land tax;
exemption from environmental tax.
«At the same time, upon detailed analysis of the already adopted regulatory acts and taking into account the absence of part of the declared regulation, it becomes obvious that the stated benefits are not universal,» TAF Industries noted in its response.
They emphasized that for companies already using the «Diya.City» tools, the tax and regulatory benefits of Defence City are largely offset, and in some aspects may even create additional restrictions or legal uncertainty.
Given this, in its current version, the Defence City regime, according to TAF Industries, appears economically and operationally justified primarily for defense sector enterprises whose activities are focused on the export of finished products.
Для нас, як групи з потужною R&D-складовою та високою конкуренцією за інженерні таланти, ключовим фактором залишається модель роботи з людським капіталом. Частина компаній L7 уже є резидентами Дія.City, і на сьогодні цей режим дає більш зрозумілі та конкурентні умови для легальної оплати праці, утримання та масштабування команд.
Віримо, що подальший діалог між державою та бізнесом дозволить створити режим, який одночасно посилить обороноздатність країни й дасть компаніям можливість сталого розвитку в Україні.
Для нас, як групи з потужною R&D-складовою та високою конкуренцією за інженерні таланти, ключовим фактором залишається модель роботи з людським капіталом. Частина компаній L7 уже є резидентами Дія.City, і на сьогодні цей режим дає більш зрозумілі та конкурентні умови для легальної оплати праці, утримання та масштабування команд.
Віримо, що подальший діалог між державою та бізнесом дозволить створити режим, який одночасно посилить обороноздатність країни й дасть компаніям можливість сталого розвитку в Україні.
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