Ukraine’s push to establish a Defence City concept has sparked a critical debate within the defence technology sector, with the Diia.City United business association calling for significant revisions to the proposed legislative framework. While the association supports the initiative’s broader goals, it argues that the current draft legislation falls short of creating the necessary conditions for industry growth and fails to leverage existing tools for technological business support.
In a statement released on Friday, Diia.City United urged lawmakers to finalise the package of bills before the second reading, emphasising that the current proposals do not adequately address the needs of the defence and dual-use technology sector. The association proposed expanding the range of companies eligible for state guarantees, including those involved in R&D, dual-use goods, and software sales—particularly residents of the Diia.City space engaged in defence technologies.
“Companies should be able to choose a tax regime depending on their business model and production process,” the statement said. “Other advantages of Defence City—simplified procedures, guarantees, protection—should be available to all companies operating in the industry, including residents of Diia.City, regardless of the chosen taxation system. This is the key to the development of the entire defence and technology sector.”
A Transparent and Predictable Export System
Diia.City United also stressed the need for a transparent, controlled export system, arguing that the current bills lack the specificity required to strengthen Ukraine’s defence capabilities and attract investment. The association called for clear, predictable, and digital control procedures to facilitate integration into EU and NATO supply chains.
“The bills contain only general declarations, while Ukraine needs an effective system that will enable Ukrainian private companies to develop, attract investment, and create conditions for opening R&D centres of international companies in the country,” the statement said.
The association highlighted that a well-structured export system would not only boost foreign exchange earnings and tax revenues but also prepare companies for a potential decrease in government orders post-war.
Strengthening Data Protection and Simplifying Customs Procedures
To mitigate risks of sabotage and espionage, Diia.City United proposed strengthening the protection of defence companies’ data by restricting access to information on their ownership and operations in public registers. This would prevent adversaries from identifying key personnel and facilities.
Additionally, the association called for the simplification of customs procedures, ensuring that norms apply not only to Defence City registrants but also to all companies working on defence or dual-use technologies, including Diia.City residents.
Legal Protections for Defence Contractors
Diia.City United also expressed support for the Prosecutor General’s decision to open criminal proceedings against defence companies, viewing it as a necessary measure to protect manufacturers from unjustified pressure and provide additional legal safeguards.
“The Defence City initiative is important for the victory and reconstruction of Ukraine, but requires further development in a broad dialogue with the defence technology sector,” the statement concluded. “Diia.City United is ready for a constructive dialogue and cooperation with people’s deputies to create truly effective legislation.”
As Ukraine seeks to bolster its defence industrial base, the debate over Defence City underscores the need for a balanced approach that fosters innovation while addressing security and operational concerns. The outcome of this legislative process will shape the future of Ukraine’s defence technology sector and its role in broader European security frameworks.
