Currency Law enacted
Tax & Legal Alert
7 February 2019
Law of Ukraine “On Currency and Currency Operations” No.2473-VIII dated 21 June 2018 (“Law”) came into effect on 07 February 2019
The National Bank of Ukraine (“NBU”) approved and published its resolutions that will guide the functioning of the currency market of Ukraine. The new system of currency regulation introduces over 20 liberalization provisions to ease doing business, in particular:
1) Currency control of export-import operations for up to UAH 150 thousand was canceled.
2) Individual licenses for foreign currency transactions will be replaced by a system of elimits, in particular, €2 million a year for legal entities, and €50 thousand a year for individuals.
3) Sanctions that involve winding-up of foreign economic activities will no longer apply.
4) Limit for early repayment of external liabilities was canceled.
5) For external borrowings, the registration procedure was replaced by the requirement to provide information for the reporting purposes.
6) Currency control of export operations will be the responsibility of only the bank that received information about the customs declaration.
7) Legal entities may freely use accounts abroad (except for operations on transfer of funds from Ukraine to such accounts).
8) Investments in Ukraine are now allowed to be made in the currencies included in Group 2 of the Currency Classifier.
9) Residents are allowed to make life insurance payments in foreign currency.
10) Foreign currency settlements under currency government bonds are now allowed.
11) Settlement period for export-import transactions was extended to 365 days.
12) Individuals may make cross-border transfers totalling up to UAH 150 thousand a year without having to open a bank account.
13) Individuals and legal entities may purchase precious metals for the amount equivalent to UAH 150 thousand a day (no restrictions for specialized legal entities).
14) Legal entities are allowed to accumulate foreign currency on their accounts for repayment of external debts.
15) Any valuables worth over €10 thousand must be included in the relevant customs declaration when moved across the border.
16) UAH LORO accounts with non-resident banks may be used for investments in and lending to residents.
17) Process of performing transactions through non-resident legal entities' accounts with Ukrainian banks is simplified and liberalized.
18) Legal entities are allowed to bring precious metals in/out of Ukraine if permitted by their Charters.
19) Individuals are allowed to purchase foreign currency online (up to the equivalent of UAH 150 thousand a day).
20) Banks are permitted to perform foreign currency swaps between residents and nonresidents.
21) Non-deliverable forwards and debt hedging forwards are allowed.
22) Non-resident banks are allowed to buy foreign currency using the whole balance amount in UAH on their LORO account.
23) The requirement to pre-reserve cash in UAH for the purchase of foreign currency (T+1) was canceled. However, some restrictions still continue to apply, including:
1) Mandatory sale of foreign currency proceeds in the amount of 50% and from 01 March 2019 – 30%
2) Limit on repatriation of dividends – up to €7 million per month, incl. for 2018
3) Ban on purchasing foreign currency with borrowed funds
4) Requirement that legal entities must buy foreign currency only against their commitments
At the same time, the NBU contemplates gradual lifting of the above restrictions. The ultimate goal of these measures is to remove all current restrictions and ensure the free movement of capital.
In addition to the aforementioned measures, a number of other fundamental changes have also been introduced:
- instead of the total currency control of all transactions, a risk-based approach to currency supervision was introduced;
- instead of account regimes, which provided for an exhaustive list of transactions for remittance and transfer of funds from a specific type of accounts, now we have operations that can be carried out by the holder of a current account (as well as prohibited transactions), depending on the status of the owner and the purpose of the transaction;
- a new procedure for applying measures of influence to banks is implemented from 07 February 2019. When applying such measures of influence as a written reservation, suspension of certain types of transactions and imposition of fines, the NBU will consider both the severity of the violation and the bank's respective actions that caused violations.
We will be happy to provide you with advisory support on all issues you may have in relation to the aforementioned legislative changes.