To gain resident status, arms producers must comply with clearly defined legislative requirements. One of the key conditions is the proportion of qualified income — revenue derived either from the production and supply of defence products or from related works and services.
The general rule
For most applicants and residents of Defence City, qualified income must account for at least 75% of total company revenue. An exception exists for the aircraft manufacturing sector, where the minimum threshold is set at 50%.
Legal framework
Article 37(6) of the National Security Act establishes the general requirement: a minimum of 75% qualified income. The 50% threshold applies only to entities recognised as aircraft manufacturers under the Aircraft Industry Development Act.
This status is not linked to the type of product (such as UAVs), but to the legal recognition of a company as an aircraft manufacturer. Article 2 of the Aircraft Industry Development Act defines this status through a set of criteria, most importantly the possession of licences and certificates for the design, production, repair, modification, or maintenance of aircraft and engines.
Implications for UAV manufacturers
The existence of a special licensing and certification regime is the defining feature of an aircraft manufacturer. Without it, the reduced threshold cannot be applied. Current legislation does not require UAV producers to obtain such licences or certificates. This means that even with government defence contracts, UAV manufacturers do not meet the criteria of Article 2 of the Aircraft Industry Development Act.
References to the Ukrainian Air Code, which classifies UAVs as a type of aircraft, do not alter this legal assessment. The Air Code regulates operation, flight safety, and airspace use, but does not establish criteria for aircraft manufacturer status. Similarly, holding a defence contract confirms fulfilment of an order but does not automatically confer legal status as an aircraft manufacturer.
The bottom line
UAV manufacturers that lack formal recognition as aircraft manufacturers must comply with the general requirement: qualified income of at least 75% of total revenue. The reduced 50% threshold applies only to companies with confirmed aircraft manufacturer status.
In the Defence City framework, what matters is not the technical nature of the product but the legal status of the producer. This distinction is crucial for correctly calculating qualified income and assessing compliance with residency criteria.