Can legal entities pay for goods under international business contracts using e-payment means (e.g. corporate cards) issued to their current account in foreign currency?
Yes, they can. However, the sum of a transaction based on one international business contract shall not exceed UAH 150,000 per one operational day.
Justification
Legal entities are prohibited from performing settlements under international business contracts using e-payment means, except for settlements in low-value thresholds (up to UAH 150,000 in the equivalent) based on one international business contract per one business day in accordance with Section X, paragraph 109 of Regulation No. 5.
Can foreign currency be transferred from the account of one individual to another individual’s account on the territory of Ukraine?
Yes, it can. The individual can transfer funds in foreign currency to another individual in Ukraine, if this individual is his/her relative.
Justification
An individual (resident or nonresident) can remit foreign currency from his/her own current account to another individual’s account within Ukraine in accordance with Section X, paragraphs 118, 119 of Regulation No. 5. The indicated transactions are allowed exclusively on the conditions that the receipts/transfers of funds to/from accounts are made to/from relatives.
Relatives are considered to be father, mother, stepfather, stepmother, son, daughter, stepson, stepdaughter, grandmother, grandfather, great-grandmother, great-grandfather, grandchildren, great-grandchildren, sibling (by blood and by law), cousins, aunt, uncle, niece, nephew, adopter, adoptee, guardian, person under guardianship or care, or spouse (paragraph 2, subparagraph 10, Regulation No. 5).
Can foreign currency be transferred from the current account of a resident sole proprietor to his/her personal current account in Ukraine?
No. A resident sole proprietor can sell his/her foreign currency for hryvnias from his/her current account and, after paying taxes and fees, can transfer these funds to his/her personal current account.
Justification
In accordance with paragraph 113, Section X of Regulation No. 5, funds deposited in foreign currency to the current account of a resident sole proprietor, opened for a business entity, and the transferring of such funds from this account shall be done under the terms of the current account in the foreign currency of resident legal entity, as noted in Section X, paragraphs 109 and 110 of Regulation No. 5.
The transfers of foreign currency from the current account of a resident sole proprietor to his/her personal foreign currency current account shall be prohibited.
Should a bank sell foreign currency – which had been purchased by a resident client in order to settle his/her debt liabilities owed to a non-resident under a loan/borrowings/reimbursable financial assistance agreement, and which had been accumulated on their current account at the servicing bank – if these funds were not transferred for their intended purpose in time (before the next payment date)?
Yes, the bank is required sell such funds.
Justification
Pursuant to Section IV, paragraphs 44 and 45 of Regulation No. 5, a resident client shall use foreign currency, which had been bought and accrued on his/her current account for regular repayment of a certain purpose, to a non-resident under a loan/borrowings/reimbursable financial assistance agreement, not later than ten business days after the date of such regular payment.
In line with Section IV, paragraph 47 of Regulation No. 5, the bank is required to sell the purchased foreign currency within five business days if a resident client violates intentionally the ten-day term for the use of this currency.
Can a bank client purchase foreign currency in order to make advance payments under import contracts?
Yes, he/she can. NBU regulations do not prohibit legal entities and individual sole proprietors from buying foreign currency in order to make advance payments (pre-payment) for the import of goods under international business contracts.
Justification
Section V, paragraph 54 of Regulation No. 5 defines the peculiarities of conducting only certain foreign currency purchases with the goal of conducting settlements by legal entities and sole proprietor individuals with non-residents for the import of goods supplied to Ukraine.
Can a resident make settlements with non-residents under current trade transactions by purchasing or transferring foreign currency purchased at one bank, while transferring own foreign currency using another one?
Yes, he/she can. The bank can remove currency supervision from transactions if the sum of each such transaction does not exceed the small-value threshold.
Justification
Pursuant to paragraph 3 of NBU Resolution No. 7 dated 2 January 2019, the banks shall exercise currency supervision of residents’ compliance with settlement deadlines in goods export and import transactions not settled before 7 February 2019, as specified in Section II, paragraph 21 of Regulation No. 5, in line with Instruction No. 7.
The bank shall terminate currency supervision of residents’ compliance with settlement deadlines if the sum of unsettled export and import transactions does not exceed the small-value threshold, as set out in Section III, paragraph 9, subparagraph 1 of Instruction No. 7
Are there any restrictions on the sum of foreign currency purchases and investment metals for individuals?
Currently, there are restrictions per one calendar day on the purchase of foreign currency and investment metals by individuals. However, such restrictions should be divided between cash and non-cash transactions. An individual can purchase online both non-cash foreign currency up to UAH 150,000 in the equivalent and investment metals without physical delivery up to UAH 150,000 in the equivalent, at one bank within one calendar day. On that same day, the individual can purchase foreign currency cash or investment metals with physical delivery up to UAH 150,000 in the equivalent.
Justification
Banks are prohibited to sell investment metals without physical delivery for non-cash UAH to its individual-clients in excess of the low-value threshold (UAH 150,000 in the equivalent) per one client, at one bank, within one calendar day pursuant to Section IV, paragraph 35, subparagraph 2 of Regulation No. 5.
Bank clients individuals may conduct small-value transactions to purchase non-cash foreign currency without any justification/obligations (one individual within one calendar day at one bank) in accordance with Section V, paragraph 58 of Regulation No. 5.
At the same time, authorized institutions are prohibited to conduct transactions to sell foreign cash or investment metals with physical delivery to one individual within one business day at one bank/financial institution, except for low-value transactions in accordance with Section IV, paragraph 39 of Regulation No. 5.
How can individual non-residents, who are registered as sole proprietors, use current accounts in foreign currency/hryvnia that are opened by the bank for individual non-residents?
Individual non-residents, who are registered under Ukrainian legislation as sole proprietors, can use the current accounts of resident legal entities (individual sole proprietors) to conduct transactions in foreign currency/hryvnia in their entrepreneurial activity, and they can use the current accounts of non-resident individuals for personal purposes.
Justification
Pursuant to Article 55 part two, paragraph 2 of the Economic Code of Ukraine, Ukrainian citizens, foreigners and individuals without citizenship – who are engaged in economic activity and registered as sole proprietors under the law – are deemed to be legal entities.
In particular, residents are individual sole proprietors who are registered in accordance with the laws of Ukraine pursuant to Article 1, part one, paragraph 9, subparagraph 6 of the Law of Ukraine, On Currency and Currency Operations.
The terms, procedures and pecularities of transactions involving the current accounts of bank clients is specified in Section X of Regulation No. 5.
Can a bank drop currency supervision of export and import transactions, if the sum of each such transaction does not exceed the small-value threshold and the violation of the payment deadlines had been registered before the Law of Ukraine On Currency and Currency Operations was enacted (before 7 February 2019)?
Yes, it can. The bank can cease currency supervision of transactions if the sum of each such transaction does not exceed the small-value threshold.
Justification
Pursuant to paragraph 3 of NBU Resolution No. 7 dated 2 January 2019, the banks shall exercise currency supervision of residents’ compliance with settlement deadlines in goods export and import transactions not settled before 7 February 2019, as specified in Section II, paragraph 21 of Regulation No. 5, in line with Instruction No. 7.
The bank shall terminate currency supervision of residents’ compliance with settlement deadlines if the sum of unsettled export and import transactions does not exceed the small-value threshold, as set out in Section III, paragraph 9, subparagraph 1 of Instruction No. 7.
How does a bank complete currency supervision of residents’ compliance with settlement deadlines under factoring transactions (with financing of residents’ export transactions at debt sale)?
The bank-factor can complete currency supervision of a resident’s export transaction after the receipt of funds from the non-resident debtor to the account of the bank-factor subject to the availability of all documents related to the export transaction.
Justification
The bank shall complete the currency supervision of residents’ compliance with settlement deadlines in the event of the lender’s substitution in liability to the goods export transaction – after payments made to the resident’s current account – of the new lender’s funds in the bank received from the non-resident debtor for the goods supplied by the resident-original lender, and subject to the availability of documents on the change of lender in liability to the export transaction pursuant to Instruction No. 7, Section III, paragraph 9, subparagraph 6.
Can the bank complete currency supervision of residents’ export transactions if the liabilities are terminated by means of considering similar counterclaims?
No (except for certain cases).
Justification
If the NBU imposes a safeguard in the form of an obligatory sale of a part of proceeds in foreign currency, the bank shall not have the right to complete currency supervision of compliance by the resident with settlement deadlines in a goods export transaction based on documents of terminating liabilities by offsetting, except for the cases set out in Section III, paragraph 10, subparagraph 5 of Instruction No. 7.
Are there any peculiarities in the currency supervision exercised by banks over the transactions of investing abroad involving a foreign broker (intermediary)?
Yes, there are certain peculiarities. The bank should analyze documents for compliance with laws when a resident transfers funds to the account of a foreign broker-intermediary. Specifically, the bank shall check the investor’s source of funds and whether there are any prohibitions for such currency transactions under Ukrainian law. The bank shall decide independently on the need to submit documents related to the currency transaction by the client. One such document can be the intermediary agreement between the resident and the foreign broker, whose conditions the NBU recommends analyzing.
Justification
Pursuant to Regulation No. 2, the bank shall decide independently on the client’s need to submit certain documents related to such currency transactions. The bank shall analyze the client’s documents/information for the availability/absence of prohibitions for the respective currency transactions, according to the laws of Ukraine, including certain foreign jurisdictions stipulated in Section I, paragraphs 143 and 144 of Regulation No. 5.
If the intermediary agreement (application for the purchase of foreign currency, payment order) includes information that the investment instrument and/or non-resident seller is registered/located/resides in the countries (territories) noted in Section I, paragraphs 143 and 144 of Regulation No. 5, the bank shall reject such currency transactions.
The bank shall apply a risk-based approach to intermediary agreements – on the date which, as a rule, the investment instrument and/or non-resident seller are unknown – that involves:
assessing the risks as to whether the foreign broker under the intermediary agreement has a license for the respective activity in the country of his/her registration/location
becoming assured that the intermediary agreement does not have obvious signs of a currency transaction that can be tied to the evasion and/or non-compliance with the requirements and restrictions set by the laws of Ukraine. Otherwise, the bank shall demand additional documents from the resident according to Regulation No. 8 and make a final decision on the transaction based on the results of this analysis.
Does the e-limit apply to transfers of funds by a resident individual from Ukraine in order to buy a residence abroad?
Yes, he/she can. Such transfers shall be made within the e-limit noted in Regulation No. 5. At present, the limit is EUR 50,000 per year.
Justification
Investments abroad are currency transactions that involve residents investing currency into investment instruments abroad with the goal of gaining profit or achieving social status, according to Section I, paragraph 2, subparagraph 5 of Regulation No. 5. One way a resident makes investments abroad is with the purchase of real estate, particularly an apartment. Such an operation shall occur in adherence to the e-limit determined in Section IX, paragraph 88 of Regulation No. 5.
Are legal entities allowed to purchase foreign currency to conduct transactions within e-limits?
Yes, except for cases when such purchases are directly prohibited by NBU regulations.
Justification
In accordance with Section IX, paragraph 87 of Regulation No. 5, residents shall purchase foreign currency/transfer foreign currency/hryvnia abroad/to the current account of a non-resident legal entity opened in Ukraine (except for investment accounts) within the limits stipulated in Section ІХ, paragraphs 88, 89, 91 and 93 hereof.
In accordance with Section IX, paragraph 89 of Regulation No. 5, residents (legal entities/sole proprietors) are allowed to conduct foreign transfers from Ukraine in their economic activity, and transfers to the current accounts of non-residents legal entities opened in Ukraine (except for investment accounts). Such transactions are allowed during a calendar year, within a total amount that cannot exceed EUR 2 million (the equivalent of this amount in another foreign currency/hryvnia based on the official exchange rate of the hryvnia to foreign currencies set by the NBU on the date of the corresponding transaction).
Hence, legal entities/individual sole proprietors can purchase foreign currency to conduct foreign currency transactions within the limit stipulated by Section IX, paragraph 89 of Regulation No. 5, including the restrictions set out in Regulation No. 5.
In particular, banks shall be prohibited from purchasing non-cash foreign currency upon the instruction/application of resident clients for the purpose of depositing funds at a bank and/or in the account opened abroad with a foreign financial institution (Section I, paragraph 141, Regulation No. 5).
The full list of cases, which do not fall under the indicated restriction, is provided in Section I, paragraph 142, Regulation No. 5. Specifically, this restriction does not cover legal entities/individual sole proprietors purchasing foreign currency in order to deposit the funds into their own accounts abroad in order to maintain their own standalone subunits abroad and/or to fulfil obligations under international business contracts (except for obligations to transfer the amounts of deposits to accounts at foreign financial institutions).
Are settlements for investment instruments in Ukraine allowed between non-residents abroad (corporate rights, real estate items, etc.)? What peculiarities should be paid attention to?
Yes, they are permitted.
Justification
The list of documents, which are the basis for returning foreign investment and proceeds, profit and other funds received from investment instruments in Ukraine, is stipulated in Section VI, paragraph 71 of Regulation No. 5.
Specifically, according to Section VI, paragraph 71, subparagraph 6, indent 2 of Regulation No. 5, the documents confirming foreign investments (foreign investment agreements, agreements on joint investment activity without the establishment of a legal entity, documents confirming the rights of a foreign investor to the investment instrument, statements of resident banks on foreign investors' foreign investments in foreign currency/hryvnia, customs declarations on the import into Ukraine of goods for the purpose of investment and/or other documents confirming foreign investments in accordance with Ukrainian legislation) shall be submitted to the bank.
It is enough to submit documents supporting the rights of foreign investors to an investment instrument to comply with the requirements of Section VI, paragraph 71, subparagraph 6, indent 2 of Regulation No. 5. if the period between the date of the foreign investor acquiring the ownership rights to the investment instrument – and the date of the foreign exchange transaction on repayment to the foreign investor of foreign investment and revenue, profit, and other returns on investment instruments received in Ukraine – exceeds five calendar years. Thus, under such conditions, the documents on making foreign investment shall not be submitted. In this case, confirmation on acquiring the ownership of an investment instrument by a foreign investor shall be sufficient.
In accordance with the Section VI, paragraph 71, subparagraph 6, indent 4 of Regulation No. 5, the agreement on the transfer of foreign investment instruments between non-residents, which provides for settlements outside Ukraine, with documentary evidence of its execution (filed subject to the acquisition of ownership rights to the investment instrument in the specified manner) shall be submitted to the bank. In this case, the documents filed in compliance with Section VI, paragraph 71, subparagraph 6, indent 2, of this Regulation shall confirm the previously made foreign investment in Ukraine in the investment instrument by its previous non-resident owner. The bank should also consider the exceptions mentioned above regarding submitting documents provided by Section VI, paragraph 71, subparagraph 6, indent 2 of Regulation No. 5.
In addition, banks should comply with Regulation No. 8 in such transactions.
Are individual residents allowed to make foreign investments through a foreign broker (intermediary)?
Yes, he/she can. Such transactions shall be made within the e-limit (EUR 50,000 per calendar year) and in consideration of restrictions to investing in certain foreign countries noted in Resolution No. 5 (offshore jurisdictions, aggressor states/occupiers, states failing to comply with Financial Action Task Force (FATF) recommendations, etc.).
Justification
NBU regulatory documents do not restrict a resident’s right to choose how he/she is going to invest abroad. For instance, he/she can transfer funds directly to the account of a seller of a foreign investment instrument, or refer services provided by a professional intermediary, such as a foreign broker, which is standard global practice. In the prior case, the funds will be transferred to the bank account of the foreign broker.
Such transactions shall be made during the entire calendar year for a total sum not exceeding EUR 50,000 inclusive (Regulation No. 5, Section IX, paragraph 88).
It should be also mentioned that in accordance with Section I, paragraph 144 of Regulation No. 5, foreign investment transactions are prohibited if the investment instrument and/or non-resident seller is registered (located, resides) in the country (on the territory) that:
- is included in the Cabinet of Ministers of Ukraine’s list of offshore zones
- recognized by the Verkhovna Rada of Ukraine as an aggressor state/occupier (e.g. the Russian Federation is such a state)
- does not implement or poorly implements the recommendations of international organizations and intergovernmental organizations that conduct activities in the sphere of fighting against money laundering, terrorist financing (AML/CFT) or the financing of distributing weapons of mass destruction
- has strategical deficiencies in AML/CFT according to the statements of the Financial Action Task Force (FATF).
Can residents receive funds in the form of loans/borrowings/reimbursable financial assistance from non-residents? What peculiarities should be paid attention to?
Yes, they can.
Justification
The resident and his/her servicing bank shall follow Section IX (that relates to the limits set for the relevant transactions) and Section X (terms, procedure and peculiarities for transactions involving the current accounts of bank clients) of Regulation No. 5 when giving loan/reimbursable financial assistance in foreign currency to non-residents (including purchases of foreign currency).
Does the NBU set maximum thresholds for interest rates for loans/borrowings that resident borrowers attract from non-residents?
No. The NBU does not set numerical values for maximum interest rates thst restrict the total value of loans/borrowings received by residents from non-residents.
At the same time, in determining a loan’s terms with non-residents and conducting currency transactions under these agreements, residents should consider that Ukrainian laws oblige banks to detect questionable currency transactions, particularly when establishing inconsistencies between the value of an external loan based on certain agreements and market conditions.
Justification
Pursuant to paragraph 8 of Regulation No. 8 authorized institution shall additionally analyze documents (information) about currency transactions when setting indicators, as noted in the Annex to Regulation No. 8, in order to confirm or reject a currency transaction as questionable.
The list of such indicators includes, in particular, Indicator No. 24 relating to currency transactions under a loan/borrowing agreement, concluded by a resident borrower with non-residents, as to which a bank may have doubts based on the non-compliance of the value of a foreign loan with market conditions.
For more details on assessing the value of external loans secured under a loan agreement in comparison with market conditions, we suggest reviewing the NBU recommendations provided to banks in Letter No. Р/25-0006/2831 dated 17 January 2019.
Is it allowed to purchase foreign currency for the purpose of granting a loan/reimbursable financial assistance to a nonresident by a resident?
Yes, it is.
Justification
The resident and his/her servicing bank shall follow Section IX (that relates to the limits set for the relevant transactions) and Section X (terms, procedure and peculiarities for transactions involving the current accounts of bank clients) of Regulation No. 5 when giving loan/reimbursable financial assistance in foreign currency to non-residents (including purchases of foreign currency).
Is it mandatory to translate into Ukrainian the documents related to currency transactions?
No. This issue is in the sphere of contractual relations between a client and his/her bank.
Justification
NBU regulations, which are the basis for the new system of currency regulations, do not require banks to translate documents related to currency transactions into the Ukrainian language, and do not require certifying such translations with a notary.
Can a bank receive commissions in foreign currency on the territory of Ukraine?
In Ukraine, commissions are paid in hryvnia in accordance with the law. However, not all payments relate to commission payments. The essence of transfers and contractual terms shall be the basis of decisions to qualify such payments as commissions on the territory of Ukraine.
Justification
Pursuant to Article 5, part two of the Law of Ukraine On Currency and Currency Operations all payments in Ukraine shall be made in hryvnias except for transactions stipulated in subparagraphs 1-6 of part two hereof.
In accordance with Article 5, part three hereof, the payment of fees and commissions – and other payments related to the transactions specified in part two paragraphs 1-6 of this article – are made solely in hryvnias, apart from the payment of loans or deposit interest, which can be done in foreign currency, investment metals or in hryvnias.
Do sole proprietors need to submit declarations to the NBU about currency and property they possess outside Ukraine subject to the Law of Ukraine On Currency and Currency Operations dated 7 February 2019?
No. The last period that required submitting such declarations was Q4 2018.
Justification
The Cabinet of Ministers Decree No. 15-93 On the System of Currency Regulation and Control dated 19 February 1993, and Presidential Decree No. 319 On Urgent Measures on the Retrieval to Ukraine of Currency Valuables Illegally Held Abroad dated 18 June 1994, have been declared null and void pursuant to Article 16 of the Law of Ukraine On Currency and Currency Operations.
Residents of Ukraine shall not declare currency valuables and other property belonging to them and located outside Ukraine pursuant to the Law of Ukraine, On Currency and Currency Operations.
Considering the above mentioned, Ukraine’s sole proprietors are not required to submit declarations of currency valuables, income and property belonging to residents of Ukraine, and that are located outside Ukraine, for reporting periods starting Q1 2019.
The last period requiring such declarations was Q4 2018.
Can a bank demand a passport during an individual’s sale of cash in foreign currency of up to UAH 150,000 in the equivalent?
National Bank regulations do not require presenting passports during such transactions. At the same time, the bank shall determine independently its system of monitoring its clients’ transactions and can demand passports being presented in order to adhere to limits on the sale of foreign currency.
Justification
Authorized institutions are not allowed to sell cash in foreign currency or investment metals with the physical delivery to one individual per one business day within the bounds of one bank/financial institution, except for low-value transactions (up to UAH 150,000 in the equivalent) pursuant to Section IV, paragraph 39 of Regulation No. 5.
How can I invest in Ukraine?
- In Ukrainian currency (the hryvnia, UAH) or foreign currency (Group 1 and Group 2 of the NBU’s currency Classifier);
- Investment can be made in:
- shares
- bonds
- other securities
- equity rights
- any kind of movable property
- real estate and related property rights, etc.
Which way I can invest?
- To create an enterprise, which is 100% owned by foreign investor, to open a branch or purchase the whole enterprise/company/firm
- To purchase a share of already operating enterprise
- To purchase real estate/movable property – houses, flats, premises, equipment, transport etc. by obtaining it directly or in form of shares, bonds and other securities
- To hold a business (entrepreneurship) activity on product distribution agreements etc.
How can I make payments to Ukraine?
- You can transfer funds (foreign currency or UAH) from abroad on your own account with local bank:
- Current account
- Investment account
- Escrow account
- Correspondent account.
The foreign currency on investors’ accounts can be exchanged into UAH without any limits and vice versa, UAH can be freely exchanged to foreign currency and transferred abroad.
- Funds from abroad can be transferred directly on resident’s account in Ukraine. This resident can be a seller of the investment object, same as intermediary (f. e. securities trader)
- The payments on the territory of Ukraine can be done in UAH/foreign currency from own accounts with other investors or residents, including nominee (omnibus) accounts in Ukraine
- Payments also can be done via foreign custodian bank’s correspondent account, which has a securities account at the National Bank of Ukraine (payments should be done on trading ukrainian government bonds only)
- The own escrow account also can be used for purchasing ukrainian issuers’ shares by «squeeze-out» procedure
- Funds can be transferred from one own account to another, opened in a local banks, without any limitations;
The foreign investor can freely hold funds on deposits in UAH/foreign currency in local banks.
How can I repatriate my funds from investments to Ukraine?
- Funds from investments (sale, reducing share in capital, incomes/dividends) can be obtained on accounts (current/investment/investor’s correspondent accounts), opened in a local banks. These funds can be then transferred to accounts abroad
- These funds also can be obtained on accounts abroad directly without transition through accounts in local banks.
Payments on such transactions, including cross-border transactions, can be done freely in:
- UAH
- Foreign currency (1st and 2nd groups of the NBU’s Currency Classifier).
Such transactions can be done without any limitations in volumes and with proper documentation for financial monitoring purposes, provided to servicing bank. For example:
- on dividends repatriation the servicing bank should have documentation, proving foreign investor’s property on corporate rights/investment certificates of ukrainian issuer, which dividends are payed on and issuer’s decision on dividends payment to foreign investor;
- on selling local government bonds by foreign investor, providing an agreement on selling government bonds by foreign investor and an account statement (issued by custodian, which proves investor’s property rights on government bonds on the date of transaction or which holds all information about transaction’s performance) is enough to proceed;
For information: until recently Ukraine had a temporary set of safeguard measures, which contained limits on dividends and proceeds from selling securities, corporate rights etc. repatriation. As of now, these limits are cancelled completely for foreign investors.