Ukraine Defence Tech: Legal Guide for Investors
Updated 8 October 2026. Author: Peter Bilyk, Head of Technology and Investment and AI, Juscutum.
This guide is for general information and is not legal advice. Rules in this area change frequently, so confirm current requirements before acting.
Doing business in Ukraine's defence technology sector means working with several separate regimes at once: supply to the Defence Forces, export control, the Defence City tax and customs regime, investor due diligence, and the rules on corporate structure, intellectual property and tax. Each regime has its own authority and its own documents. This guide maps them and points to the detailed guides. It is written for foreign investors, partners and buyers, and for the Ukrainian manufacturers who work with them.
The regimes at a glance
- Selling to the Ukrainian army. Codification of the product, verification of the supplier by the Defence Procurement Agency, then procurement and contract. Detailed guide: Selling to Ukraine's Ministry of Defence.
- Exporting products or technology. A permit from the State Export Control Service (SSECU). Detailed guide: Export Permit for Military and Dual-Use Goods from Ukraine.
- Tax and customs support. Defence City resident status, granted by the Ministry of Defence. See the section below.
- Investing in a defence tech company. A five-stage round and a due diligence that goes deeper than in an ordinary technology deal. See the section below.
- Structure, intellectual property and tax. How the group is built, who owns the technology and which VAT relief applies to which operation. See the sections below.
Selling to the Defence Forces
A manufacturer normally goes through three stages. First, the product is codified and receives an NSN in the Catalogue of Supply Items. Second, the company is verified by the Defence Procurement Agency (DPA) and entered in its register of verified suppliers. Third, the DPA runs the procurement and a contract is signed.
Since 1 January 2026 the DPA is the single buyer for the army. Under Cabinet Resolution No. 447 of 6 April 2026 it is also the central purchasing organisation for defence customers under martial law. In March 2026 the government simplified the route: confirmation of an urgent need is no longer required for codification, and for tactical-level drones and electronic warfare equipment a manufacturer's quality certificate is sufficient at procurement. In that case the manufacturer is fully responsible for the quality of delivery.
A foreign partner should note that the rules for foreign suppliers, joint production and localisation depend on the structure of the deal and are reviewed separately. Read more: Selling to Ukraine's Ministry of Defence.
Exporting defence products and technology
An export permit for military and dual-use goods is issued by SSECU. In 2026 there are two review tracks: a standard track of up to 90 calendar days and a simplified Fast Track of up to 30 calendar days. Fast Track applies to supplies to countries that have signed Drone Deal agreements with Ukraine and only to goods that are not on the list of critical goods.
Export is wider than shipping a product. The transfer of software, technical documentation, or access to technology such as source code and drawings can also be an export. For a foreign buyer or investor this means that risks arise before logistics, during negotiations and technical demonstrations. A product that is not on a control list can still be controlled if there is a potential military use, a sensitive destination or a specific end user. Violating the procedure for international transfers of goods subject to state export control can lead to criminal liability under Article 333 of the Criminal Code of Ukraine.
Practice has lagged behind the rules. As of mid-September 2026, trade bodies reported that the list of critical goods had not yet been published, so plan for the standard timeline until practice confirms faster decisions. Read more: Export Permit for Military and Dual-Use Goods from Ukraine.
Defence City
Defence City is a special legal regime of state support for defence industry enterprises. The Ministry of Defence grants resident status on the company's application, normally within 10 working days of a complete application, and records the company in the Defence City Register. The regime was created by laws adopted by the Verkhovna Rada in 2025, and the Cabinet launched it with Resolutions No. 1745 and No. 1746 of 17 December 2025. It runs until 1 January 2036 or until Ukraine joins the EU, whichever comes first.
Who can become a resident. The company must meet the requirements of Article 37 of the Law "On National Security of Ukraine". In practice this means:
- a qualified income share of at least 75% of total income, calculated under the methodology approved by Resolution No. 1745 (the law may set other values for certain activities);
- no tax or social contribution debts;
- disclosed beneficial owners and no ties to the aggressor state;
- no bankruptcy or liquidation proceedings.
Because an application requires audited annual financial statements, a newly established company cannot apply at once.
What a resident may receive. These include an exemption from profit tax on profit directed to permitted purposes (using it is voluntary), exemptions from property, land and environmental tax under the Tax Code, simplified customs procedures, support for relocation and for protecting production sites, and restricted public access to data about the company in public registers. Residents file an annual compliance report, and the Ministry may start the removal of the status if the conditions are breached, after which the incentives end.
For a foreign investor, the practical point is the structure: a group that mixes civil and defence activities may fail the qualified income test or be unable to show that tax-exempt profit was used for permitted purposes. Whether a company can be a resident of both Defence City and Diia.City needs a separate legal assessment. Read more (in Ukrainian): Defence City: how to become a resident.
Investing in a defence tech company
An investment round in a defence tech company follows five stages: preparation, negotiations and main terms, due diligence, signing of documents, and closing. The investor looks beyond the product and the market. It also assesses whether the company can operate under national security rules, export restrictions and sanctions risk.
Due diligence usually covers six areas:
- Structure and control: who really controls the business, related parties, founders' agreements, option programmes.
- Rights to the technology: who owns the code, drawings, documentation and algorithms, and whether employees and contractors have transferred their rights in writing.
- Contracts and the state contour: state contracts, penalty clauses, disputes and the quality of evidence of performance.
- Sanctions and export: counterparties, supply chains, beneficial owners, and export permits for the product or technology transfer.
- Finance and tax: the economics of the business, tax risks, dependence on one customer or channel.
- People and access: who has access to sensitive information, NDAs, and a plan to retain key engineers.
Deals most often stall on a gap in the chain of rights to the technology, a conflict between founders, risky state contracts and a weak sanctions and export perimeter. A data room should normally include the group structure and corporate documents, an IP and asset register, key contracts, state contracts with acceptance acts, the export history, a short compliance memo and the personnel documents. Read more (in Ukrainian): Raising investment in DefenceTech projects.
Structure, intellectual property and tax
Structure. Defence companies commonly separate the operating company from the owner of the intellectual property, and use a special purpose vehicle (SPV) for individual projects. This helps to protect key technology, simplify M&A and investment, and make the project transparent for the Ministry of Defence. Combining civil and defence activities in one entity, with shared accounts, staff, assets and intellectual property, widens the perimeter of any inspection, makes it harder to prove the targeted use of funds, and increases tax risk. Read more (in Ukrainian): Risks of mixed structures in military projects and Legal structuring of defence companies.
Intellectual property. For military developments the usual issues are rights to code and designs created by contractors, a founders' agreement, non-disclosure agreements without an access regime, and dual-use checks before patenting or filing abroad. Read more (in Ukrainian): IP protection in military developments.
VAT. There is no single VAT relief "for defence". Each operation is checked against a specific provision of the Tax Code, the goods and their classification code, and the end recipient, and the supporting documents must be kept from the time of the operation. Read more (in Ukrainian): VAT relief for defence procurement.
Ten questions to ask before you sign
- Who are the ultimate beneficial owners, and are they disclosed?
- Does the company own the rights to its code, designs and documentation, and are the transfers from employees and contractors in writing?
- Is the product codified, and on what basis is it supplied to the Defence Forces?
- Which export regime applies to the product, and who is the end user?
- Would any planned technology transfer, demonstration or repository access count as an export?
- Are civil and defence activities separated in the structure, the accounts and the staff?
- Do the state contracts contain penalty, acceptance, advance payment and intellectual property terms that the company can fulfil?
- Which specific provision of the Tax Code supports each operation relieved from VAT, and where are the documents?
- Does the company meet the Defence City criteria, if resident status is part of the plan?
- What sanctions and counterparty checks does the company run, and who decides?
Frequently asked questions
Who buys weapons and equipment for Ukraine's army?
Since 1 January 2026, the Defence Procurement Agency, which has also been the central purchasing organisation for defence customers under martial law since April 2026.
Who issues an export permit for military goods?
The State Export Control Service of Ukraine (SSECU). The standard review takes up to 90 calendar days, and the simplified Fast Track up to 30 calendar days.
Is the transfer of source code an export?
It can be. Transferring technology, source code or access to it to a foreign person is also an export.
Who grants Defence City status?
The Ministry of Defence of Ukraine, normally within 10 working days of a complete application.
Can a new company become a Defence City resident?
Not immediately, because the application requires audited annual financial statements.
Why do investors check defence companies more thoroughly?
Because the sector overlaps with national security, export control, sanctions, state procurement and reputational risk.
Sources and related reading
- Codification of new weapons and military equipment (Ministry of Defence)
- How to become a supplier of the Defence Procurement Agency (Ministry of Defence)
- Defence exports portal of the Ministry of Defence and SSECU
- Cabinet of Ministers: package of documents for the launch of Defence City
- Selling to Ukraine's Ministry of Defence · Export Permit for Military and Dual-Use Goods from Ukraine
- Legal support for DefenceTech companies and investors (Ukrainian)
Contact
To discuss selling to the Ministry of Defence, an export permit, Defence City status or a defence tech investment, contact the Juscutum Technology and Investment team through the contact page.
