The Defence City regime offers enhanced conditions for businesses while establishing clear and robust compliance and reporting obligations towards the Ministry of Defence of Ukraine.
From a practical perspective, participation in the Defence City regime involves two key stages:
This service will be relevant if you:
are already a Defence City resident and are preparing the annual compliance report for submission to the Ministry of Defence of Ukraine;
are planning to obtain Defence City status and are in the process of preparing the application and supporting documentation package.
The legal framework governing the Defence City regime is established by the Law of Ukraine dated 21 August 2025 No. 4577-IX “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Supporting Enterprises of the Defence and Industrial Complex”.
This Law provides for the implementation of the Defence City regime until 1 January 2036 or until Ukraine’s accession to the European Union, whichever occurs earlier.
a power of attorney, or a duly certified copy thereof, if the application is submitted by an authorised representative of the applicant;
a compliance report (in the prescribed form) together with the annexes required by law;
annual financial statements prepared in accordance with applicable legislation.
Parker Russell Ukraine provides end-to-end Defence City audit services, ensures submission of the compliance report in a format that fully meets legislative requirements, and delivers methodological support in preparing the complete application documentation package for Defence City resident status.
A Defence City resident is required to submit an annual compliance report to the Ministry of Defence of Ukraine no later than 1 June of the year following the reporting year.
The reporting period covers 1 January to 31 December of the preceding calendar year.
Content of the Compliance Report:
The compliance report must include, inter alia:
information confirming the resident’s compliance with the requirements set out in Law of Ukraine No. 4577-IX;
information on the proportion of qualified income in total income for the reporting period;
information on the performance of contracts during the reporting year that substantiate the amount of qualified income.
Mandatory Annexes:
The compliance report must be accompanied by the following mandatory annexes:
annual financial statements prepared in accordance with applicable legislation;
an auditor’s report (audit opinion) issued by an authorised audit firm following an ISAE 3000 assurance engagement on the compliance report;
other documents as determined by the Cabinet of Ministers of Ukraine.
Parker Russell Ukraine supports Defence City residents in preparing the compliance report, the auditor’s report issued by the audit firm, and all other mandatory annexes submitted to the Ministry of Defence of Ukraine together with the annual financial statements.
Content of the Compliance Report:
The compliance report must include, inter alia:
information confirming the resident’s compliance with the requirements set out in Law of Ukraine No. 4577-IX;
information on the proportion of qualified income in total income for the reporting period;
information on the performance of contracts during the reporting year that substantiate the amount of qualified income.
Mandatory Annexes:
The compliance report must be accompanied by the following mandatory annexes:
annual financial statements prepared in accordance with applicable legislation;
an auditor’s report (audit opinion) issued by an authorised audit firm following an ISAE 3000 assurance engagement on the compliance report;
other documents as determined by the Cabinet of Ministers of Ukraine.
Parker Russell Ukraine supports Defence City residents in preparing the compliance report, the auditor’s report issued by the audit firm, and all other mandatory annexes submitted to the Ministry of Defence of Ukraine together with the annual financial statements.
Qualified Income and Its Share
In accordance with the Law of Ukraine dated 21 August 2025 No. 4577-IX, the share of qualified income of an applicant or a Defence City resident must be:
not less than 75% of total income;
not less than 50% for aircraft manufacturing entities, as defined by special legislation.
The Law sets out the definition of qualified income and the rules governing its calculation and recognition.
Compliance with Residency Requirements and Absence of Restrictive Circumstances
As part of our review, we assess whether any circumstances exist or have arisen that may preclude Defence City residency, including, but not limited to:
absence of corporate income tax payer status;
outstanding tax liabilities and/or arrears in the payment of unified social contributions exceeding the statutory thresholds;
unresolved deficiencies related to beneficial ownership disclosure and/or submission of ownership structure information;
other circumstances provided for by the applicable legislation.
Our objective is to prepare a complete and submission-ready documentation package for the resident/applicant to be filed with the Ministry of Defence of Ukraine, ensuring full compliance with statutory requirements relating to the content of the compliance report and its mandatory annexes.
Verification and confirmation of the qualified income ratio
Review and confirmation of the calculation of the share of qualified income in total income for the reporting period, including reconciliation of the figures disclosed in the compliance report with accounting records and the statutory rules for classification of qualified income, including income generated through co-performers and subcontractors.
Preparation of the submission documentation list and document request
Development of a structured document request and checklist tailored to the compliance report requirements, assistance in identifying the necessary data, and systematisation of the supporting materials into a submission-ready package sufficient to substantiate the information disclosed in the report (annual financial statements, contractual documentation, supporting evidence of qualified income and contract performance, etc.).
Compliance report
Support in preparing the compliance report for submission to the Ministry of Defence of Ukraine, including structuring the report, developing its substantive sections, and aligning the report with legislative requirements as well as the form and procedure established by the Cabinet of Ministers of Ukraine.
Auditor’s report (audit opinion) on the compliance report
An auditor’s report issued following the ISAE 3000 assurance engagement as part of the Defence City compliance report audit, submitted as an integral and mandatory annex to the Defence City resident’s compliance report.
Submission support and regulatory communication
End-to-end support throughout the submission process to the Ministry of Defence of Ukraine, including coordination of the final documentation package, alignment of the submission method with the applicable procedure, and monitoring the readiness of materials for filing.
To develop a well-documented, compliant, and future-ready international structure tailored to your business strategy.
