TFUA and IRON call for scrapping tax breaks on imported components available from Ukrainian manufacturers

Two Ukrainian associations of private arms manufacturers — IRON Cluster and Technological Forces of Ukraine (TFUA) — are calling for the cancellation of tax breaks on components for which Ukrainian defence industry manufacturers already produce alternatives.

The proposal covers, among other items, thermal imaging cameras, electric motors, propellers, batteries, video transmitters, antennas, radio control systems, flight controllers, initiation boards, cables and other goods.

According to TFUA executive director Anastasiia Mishkina, the current system of tax incentives in the defence sector no longer reflects the capabilities of the local market, which have changed significantly since the start of the full-scale war. As a result, Ukrainian component manufacturers now face unequal market conditions, the associations say.

At the same time, organisations stress that any phased revision of import tax breaks for certain goods should maintain a balance between the needs of the defence industry and the development of domestic production. This would help create incentives for broader localisation of unmanned systems manufacturing while preserving access to critical components that Ukrainian companies do not yet produce.

Yurii Lomykovskyi, co-founder and Head of Government Relations at the IRON cluster, says Ukraine could become a component base not only for itself but also for Europe, which has long-term strategic rearmament plans.

“Supporting local component manufacturers should be our priority, but changes to tax conditions must remain predictable for final producers, as uninterrupted supply to the frontline and the provision of necessary equipment to our military depend on it,” he added.

The associations support maintaining preferential tax treatment for components used for defence purposes that do not yet have manufacturing equivalents in Ukraine. This would help ensure an uninterrupted supply and prevent shortages of critical components or production stoppages.