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One of the most hotly discussed topics in 2019 is currency control liberalization in Ukraine.The currency control liberalization was one of Ukraine’s priorities under the EU-Ukraine Association Agreement. At the beginning of 2019 the National Bank of Ukraine (hereinafter the “NBU”) approved and promulgated all long-awaited regulations, serving as the basis for a new liberal system of foreign currency control. The new currency control system will be launched on 7 February 2019, the same day as the Law of Ukraine On Currency and Exchange Transactions becomes applicable. The changes are aimed at deregulation, facilitating cross-border transactions with foreign currency and expanding the list of available foreign currency transactions.
With the new system, the NBU is making a transition from the system
of total currency control over each transaction to a system of foreign currency
supervision. This also reduces the limits of the NBU intervention in the
monetary system of Ukraine and what is most important, sets the freedom of
foreign exchange transactions. At the same time, the liberalization of the
currency control regime will, in effect, be accompanied with tightening of financial
monitoring and tax legislation, such as through BEPS and similar measures.
Restrictions which have been abolished:
1) the requirement for
registration of cross-border loans granted by non-residents has been canceled. The procedure for registration, amendment and
cancellation of registration of cross-border foreign currency loans obtained by
residents will be fully automated. Such procedures shall be initiated by an
authorized bank by sending a respective electronic document to the NBU, on the
basis of which the NBU will perform the required automated verification.
2) NBU
has lifted the restriction on early repayment of cross-border loans. This will enable businesses
to more effectively manage their debt obligations to non-residents.
3) All
types of individual licenses will be cancelled. Residents will be able to transfer
foreign currency to foreign accounts, invest in securities or real estate
abroad, obtain foreign currency loans and carry out a number of other
transactions without applying for individual foreign exchange licenses.
Other key amendments include:
the
maximum term established for settlements under export and import contracts has
been doubled – up to 365 days (earlier
180 days);
export
and import operations under UAH 150,000
(approx. EUR 4,600) shall no longer be subject to currency control.
Instead, the NBU, fiscal authorities and other competent bodies will exercise
currency supervision over transactions over UAH 150,000 (approx. EUR 4,600) in
order to ensure compliance with the currency legislation requirements;
legal
entities may now freely use accounts
abroad (except for transactions for the transfer of funds from Ukraine to
such accounts);
sanctions
for failure to meet payment deadlines in the form of suspension of foreign economic activity have been abolished;
non-residents
are allowed to open bank accounts in
Ukrainian banks (in both UAH and foreign currency), which can be used for a
wide range of transactions. Only investment accounts used to be available,
which could be used for only a limited range of transactions;
banks
are allowed to sell government
securities denominated in foreign currencies to their clients for foreign
currency;
banks
may enter into currency swaps with
residents and non-residents;
limit
on foreign currency transfers abroad by individuals without opening an account
has been increased from UAH 15,000
(approx. EUR 470) to UAH 150,000 (approx. EUR 4,600) per year;
dual control over export operations
shall no longer be applied: currency supervision will be exercised only by the
bank, having received the information on the respective customs declaration.
The following significant
restrictions have been introduced:
cap
on dividends repatriation in the amount of EUR
7 million per month for the period until 2017 (inclusive);
cap on payments for shares,
other securities, corporate rights, reduction of share capital and exit from
Ukrainian companies’ in the amount of EUR
5 million per month;
cap for making
investments abroad in the amount of EUR
2 million for
legal entities and EUR 50,000 for
individuals.
The new currency control
is an important step towards more open and investor-friendly foreign exchange
market in Ukraine. However, it should be noted that banks, even taking into
account the NBU’s liberal approach, can apply more scrutiny when carrying out
checks on their clients and request additional supporting documents provided
for by their internal regulations.