Ukraine's Cabinet has opened the construction of underground arms production space to private investors, Prime Minister Serhii Koretskyi announced on 22 October, saying the rule applies from that day. A second decision eases imports for partner-funded weapons production.

Koretskyi said the change would add more of the space arms makers need, especially as Russian strikes intensify. On 9 December 2025, the Defense Ministry reported that more than UAH 1.5 billion (about $36 million) in budget support had let war-damaged defense firms restore operations. At the time, the ministry planned to relocate or duplicate the most critical plants, and underground complexes were under construction. The new model puts no additional burden on the state budget, Deputy Defense Minister Hanna Hvozdiar said. The bill still lands somewhere, though. Defense firms will buy, lease, or take the space for use, and companies working on state contracts are among those eligible. If they pay developers out of state-contract revenue, part of the cost could come back to the budget.

Developers build, arms makers move in

The changes to Cabinet resolution No. 1494 give private investors a simplified route to construction and permits, the ministry said. Developers can build protected facilities with their own or raised funds. Deadlines, terms of use, and the handover are set in a contract between investor and defense firm. The mechanism covers new sites as well as moving or expanding existing production. If a firm gets only part of a facility, that part must be at least 25% of the facility's total area and fit for production.

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Developers must sign deals with, among others, residents of Defence City, Ukraine's special legal regime for arms makers, holders of state defense contracts, and firms the ministry designates as critical.

Tax break for partner-funded arms production

Components for weapons production that international partners pay for will enter Ukraine free of import duty and VAT, Koretskyi said. He added that customs inspection and clearance would be simplified and sharply shortened through a "single window."

Defence City, Ukraine’s special support regime for arms makers, now has 63 member companies, the Defense Ministry said in a 19 October release. That is more than double the late-May count, and Euromaidan Press calculations show the newcomers are, on average, much smaller firms.

Ukraine already buys most of its weapons at home. More than 75% of its 2025 weapons procurement budget went to domestic manufacturers. Most new weapons models cleared for military use are Ukrainian too: 892 of the 1,000 authorized from the start of 2026 to mid-June. Defence City is meant to turn that demand into more production capacity, and our calculations suggest it is now reaching smaller producers too.

Who is joining

Each resident’s figure in the ministry’s count is its qualified income, meaning revenue from selling weapons and military equipment. Applicants file details of their defense contracts for the previous calendar year with their application, the ministry’s guide shows. So the combined total changes as members join. It does not track month-to-month sales.

The 63 current residents have a combined qualified income of nearly $2.47 billion. At the end of May, 31 residents had $2 billion, the ministry reported. By July, 45 residents had over $2.07 billion, it added.

By Euromaidan Press calculations, the 32 companies added since May bring about $15 million each on average. The first 31 averaged about $64 million each. The math assumes all 31 early members remain, with unchanged figures. If they do, the newcomers are smaller producers on average, because each figure reflects a firm’s own prior-year weapons sales.

What residents get

The profit-tax break comes with a condition. Residents choose where their untaxed profit goes, but it must go to purposes the tax code allows, the ministry explained. If the money goes elsewhere, the break does not apply.

Residents also get customs incentives and state support to relocate plants and better protect production sites. They can rent state property without an auction. They can also ask to restrict access to sensitive information about them in public registries. Some defense export procedures are simplified too.

Resident status also makes a company eligible to be designated critically important to the defense industry. That lets it defer up to 100% of its staff liable for military service from the draft, the ministry noted.

To join, a company must confirm it meets the legal requirements and file an application with supporting documents. By law, the ministry has 10 working days to decide. If approved, a ministerial order grants the status, and the company enters the Defence City register.