Before second reading, bill on "Defense City" is more in line with interests of gunsmiths - Defense Express

After the amendments, the bill on the "Defense City" regime, adopted in July in the first reading, will be more in line with the interests of gunsmiths. This is stated in an editorial article of the expert publication Defense Express, which analyzes the changes that the document underwent before its adoption in the second reading.

It is noted that the key provisions of the regime, instead of the Tax Code and other laws, are planned to be included in a separate section of the Law "On National Security of Ukraine", where the procedure for obtaining and losing resident status will be fixed.

Defense enterprises that will be able to take advantage of the benefits of "Defense City" must enter the automated Register, which will be maintained by the Ministry of Defense. The automated register should guarantee data security, orderly accounting and quick access to the necessary information. However, the transparency of procedures is still a concern for manufacturers of weapons, equipment and services. After all, the administration of the register concentrates significant leverage in the hands of the Ministry of Defense.

The publication noted that the requirements for income and work of residents have been changed. After the first reading, for a resident of "Defense City" it was necessary that at least 90% of the company's total income came from the supply of goods, works and services of defense purposes. Now the general threshold has been reduced to 75%, and for aircraft manufacturing enterprises - to 50%. This will allow a larger number of companies and enterprises to take advantage of the potential of the regime.

It was agreed that a resident will be able to become a participant in two regimes - "Diia.City" and "Defense City".

The legislators expanded the list of products that fall under "Defense City". Now it covers weapons, military and special equipment, unmanned aerial and ground robotic complexes, unmanned water complexes, electronic warfare and electronic intelligence means, means of countering technical intelligence, weapons and ammunition. That is, almost everything.

The so-called "forced" relocation has been canceled, under which residents could only be in the list of "safe" regions determined by the Ministry of Defense. Now it is only a voluntary option. But state authorities and local governments are obliged to assist enterprises in moving if this happens.

The possibility of indicating as a location any address at which communication with the company is ensured, restrictions on access to electronic registers containing information about "Defense City" residents, the right not to publish financial and statistical reporting until the end of martial law have been fixed.

The conditions for exporting technologies to foreign subsidiaries for organizing production abroad remain ambiguous. The presence of an interdepartmental agreement to which the Ministry of Defense is a party and the requirement that the subsidiary must be fully owned by the Ukrainian company significantly complicate the process of creating joint ventures. This excludes options when a foreign investor would take on, for example, the costs of deploying production.

For residents, the process of obtaining a permit to export weapons is planned to be simplified, while an additional license fee is being introduced. However, there are no details yet. These issues will probably be worked out and explained in detail during the preparation of the bills for the second reading.

Recall that on July 16, the Verkhovna Rada supported in the first reading the bills No. 13420 and No. 13421 on the introduction of benefits for defense industry enterprises that will be included in the "Defense City" initiative.

The Verkhovna Rada Committee on Finance, Tax and Customs Policy, chaired by Danylo Hetmantsev, supported and recommended that the Verkhovna Rada adopt in the second reading and as a whole two key bills that lay the foundation for "Defence City".

In general, the package of bills on the creation of "Defence City", initiated by Danylo Hetmantsev, Davyd Arakhamia and a group of MPs, consists of four documents.

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