THE ROLE OF THE DEFENSE CITY LEGAL REGIME FOR UKRAINE'S INTEGRATION INTO THE EU SECURITY AREA

Abstract

The article examines the key provisions of the legal regime of Defense City, which is intended to create conditions for stimulating the modernization and expansion of the production capacities of Ukraine’s defense-industrial complex (DIC), the development of cutting-edge technologies, the attraction of investment into the sector, and the provision of the defense forces with modern military and specialized equipment. A brief analysis of the current state of the DIC and the prospects for its reform in the process of implementing the Defense City legal regime is provided. The concept of a Defense City resident is defined as a legal entity operating in the fields of defense, security, or related industries and meeting residency requirements depending on qualifying income, place of registration, absence of tax debt, and lack of ties to the aggressor state. One of the key reasons for introducing the Defense City regime is the creation of a special tax environment for defense sector enterprises. Tax incentives are expected to reduce business costs, attract additional funds for enterprise development, and enhance the competitiveness of Ukrainian products in the international arms market. The article outlines a list of tax and customs preferences, including exemptions for Defense City residents Available at: corporate income tax, land tax, environmental tax, and real estate tax. A comparative analysis of two economic stimulation models—Defense City and Diia City—is conducted. It is determined that the adoption of this regime aligns with the regulatory and legal framework for ensuring a favorable investment business environment in Ukraine, particularly for foreign financing. It is emphasized that simplifying export procedures within the customs regime for defense contracts, along with customs preferences for Defense City residents, will facilitate Ukraine’s export potential without additional expenditures Available at: the state budget and will create effective mechanisms for attracting external investment. The advantages of the Defense City regime for the economic and institutional support of Ukraine’s integration into the European security space are identified, particularly through participation in various EU programs: the European Defence Investment Programme (EDIP), the European Defence Fund (EDF), the SAFE initiative, and the PESCO program. The article reviews already implemented and planned joint defense projects with EU countries, the establishment of joint ventures, and innovative Defense Tech projects. A preliminary forecast of the impact of implementing Defense City on Ukraine’s economy and its defense capability is provided.