Lviv Finance and Taxes

05/ 02/ 2019
01/

The new Law of Ukraine “On Currency and Currency Operations” dated 21 June 2018 (“the Law“) finally becomes applicable on 7th of February, 2019, which is probably one of the most expected legal novelties of the early 2019, not only for those businesses that are dealing with foreign trade, but to everyone.

On February 5th active business community gathered to discuss changes at EBA Experts Talks: 360° Overview of New Currency Regulations.

Key thoughts from the experts of the meeting:

Natalia Anokhina, Senior associate at Arzinger law office, attorney-at-law, Head of the Legal Committee of the West Ukrainian Office of the European Business Association

On January 04, 2019 the NBU published a package of regulatory acts required for proper functioning of the new Law and forming the basis of the currency regulation system. The new currency regulation will consist of 8 key NBU Resolutions.

Starting from February 7, 2019 a number of restrictions in the foreign exchange market will be abolished or liberalized, in particular:

  • the time limit for settlements under export-import transactions is extended from 180 to 365 days;
  • supervision over export-import transactions for amount less than an equivalent of UAH 150,000 is cancelled;
  • registration of cross-border loans with the NBU is cancelled;
  • standard bank accounts with Ukrainian banks now available to non-resident legal entities for commercial activity in Ukraine;
  • the automated system of e-limits is introduced instead of individual licenses for certain FX operations.

Still, some important restrictions in the FX market are remained by the NBU, in particular:

  • EUR 7 million limit for repatriation of dividends per month;
  • EUR 5 million limit for repatriation of foreign investments per month;
  • ban for set-off under export-import transactions;
  • mandatory exchange of 50% of foreign currency proceeds of legal entities.

Oleh Kyryievskyy, Chairman of Customs Committee of EBA Western Ukrainian Office, Advice Group Partners

“New currency legislation will make export/import activities in Ukraine more market-oriented.

Not only because the term of payment within a foreign trade contract will be now 365 days (twice as was) and some archaic sanctions will no longer be applicable. But, mainly, because a new law acknowledges there should be no limitations in payments or supply of goods terms – only in certain exclusive circumstances. And while some substantive fines for terms breach are still there, the trend is surely to deregulate the field.

What I also appreciate is a supervisory but not controlling approach over the business in this regard.

We should also mention the risky moment that, I believe, is more a legislative mistake. It looks like, that with a new law introduced, services in foreign economic activity, will also be a subject of currency supervision. I really hope Cabinet of Ministers will clarify the issue with the forthcoming decision on the matter.”

Maryna Korolkevych, Head of Currency Control Department at CREDIT AGRICOLE Bank: 

“The key to the bank will remain the KYC (know your client) approach. The new law provides the transition from customer control to risk-based oversight. Banks will not require documents more than it is necessary to clarify the purpose of the transaction. Significant changes will be mostly for small and medium-sized businesses, since export-import transactions are not subject to control of up to 150 thousand hryvnya in equivalents. Banks will ask for documents for the first transactions only to understand the essence of the transaction. Then all future operations will be simplified.

Also, banks are waiting for requests from large business, because they have the opportunity to enter into currency forwards to hedge debt obligations. In addition, companies will be able to pay bonuses, compensation, open accounts and transfer funds abroad, because it was all under the subject of licensing. Among the innovations are the lending rates that banks will need to determine themselves, at the moment the billing mechanism is in line with the NBU.”

Hanna Kalinichenko, Arzinger Senior Associate of Banking and Finance Practice

“Ukrainian business and foreign investors not without reason concern themselves with the last changes in Ukrainian currency legislation since they will have a direct influence on their activities.

Among other things, foreign investors are particularly interested in the repatriation of dividends and capital. Basically, new currency legislation does not introduce anything new in comparison with the existing rules.  For instance, the NBU extended EUR 7 million limit for repatriation of dividends per month and EUR 5 million limit for repatriation of foreign investments per month. The list of the documents to be provided to a bank for effecting respective payments remained more or less the same.

For local companies as well as for individuals cross-border investments are of immediate interest. It is well-known fact that since adoption by the Cabinet of Ministers of Ukraine of the Decree On Currency Regulation And Currency Control in 1993 currency cross-border investments have been falling under the NBU licensing regime. With effect from 7th February, all individual licenses will be abolished. At the same time the individual licensing regime will be replaced with an e-limits system providing for annual limits within which companies and individuals will be able to make such investments.”

Despite the fact that a lot of limitations are still valid, it is expected that the anti-crisis provisions are to be abolished as soon as macroeconomic and macro-financial conditions are improved. In general – adoption of new currency legislation is a significant step towards simplification of the procedures, harmonization of Ukrainian legislation with EU and international practices and shifting of foreign trade on the new level.

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