Complying with Ukrainian foreign currency controls

Foreign currency operations are regulated by the 1993 Cabinet of Ministers Decree, On System of Currency Regulation and Currency Control, as well as a number of implementing rules issued by the NBU. A number of foreign currency transactions may only be undertaken if an individual license is obtained from the NBU. However, there has been an ongoing trend toward less restrictive rules.

Some of the main points to note about Ukraine's current exchange control regulations are:

- Payments under foreign trade contracts between a resident and a nonresident entity should be in foreign currency only.
- Payments in foreign currencies between residents in the territory of Ukraine are generally prohibited (although there are some exceptions, such as bank loans).
- Foreign loans must be registered with the NBU before funds are remitted to Ukraine. NBU rules also limit the maximum interest and other charges that may apply to foreign currency loans from nonresidents.

The individual licence is demanded by following operations:

A. Export, transfer and transfer for limits of Ukraine of currency values.
B. Import, transfer, transfer to Ukraine currencies of Ukraine if they exceed, established by National bank of Ukraine limits.
C. Granting and reception by residents of credits in a foreign currency if terms and the sums of such credits exceed the limits established by the legislation.
D. Foreign currency use in territory of Ukraine as an instrument of payment or as pledge.
E. Placing of currency values into accounts and contributions outside of Ukraine.
F. Realisation of investments abroad, including by acquisition of securities, except for securities or other corporate rights received by physical persons - by residents as a gift or by right of succession.

Operations at which realisation of reception of the licence the list of the currency transaction is not required also, corresponding to the general licence of National bank of Ukraine given out to commercial banks, it is resulted in the text of the Decree and in given article it is not resulted.
According to point 5 of this article, reception of the individual licence of one of the currency transaction parties means also the permission to its realisation by other party or the third party which concerns this operation if another is not provided by conditions of the individual licence.

In Decree article 11 it is said, that the National bank of Ukraine in sphere of currency regulation carries out the currency policy proceeding from principles of the general economic policy of Ukraine, and also:

• Publishes obligatory statutory acts to execution on realisation of operations in the currency market of Ukraine,
• Grants licences for realisation of currency transactions and makes of the decision on their cancellation.

General licences stand out to commercial banks and other financial institutions of Ukraine on realisation of the currency transactions which are not demanding the individual licence, for all period of action of a mode of currency regulation.
According to Decree article 16, illegal buying up, sale, an exchange or use of currency values as instruments of payment or as pledge, that is fulfilment of these actions without the corresponding permission (licence) if presence of such permission (licence) is obligatory, involve administrative or the criminal liability, it agree the current legislation of Ukraine.
To residents, the non-residents guilty of infringement of rules of currency regulation and the control, following measures of responsibility (financial sanctions) in the form of the penalty in the sum equivalent to the sum (cost) of currency values, the Ukraine counted in currency under the exchange rate of National bank of Ukraine at date of realisation of such operations or the activity termination financially-credit institution are applied.
Sanctions to the infringers, the operating currency legislation of Ukraine, are applied by National bank of Ukraine and by its definition - the establishments subordinated to it. The appeal of actions on imposing of collectings is made in a judicial order.

The sums of the collected penalties go to the state budget of Ukraine.
Position about the currency control confirmed by the decision of Board of National bank of Ukraine from 08.02.2000 N 49, defines main principles of realisation by National bank of Ukraine of functions of a principal organ of the currency control 44 Laws of Ukraine "About National bank of Ukraine" and articles 13, 16 Decrees of the Cabinet of Ukraine from 19.02.93 N 15-93 "About system of currency regulation and the currency control".
Section 2 of this Position defines responsibility for infringements of the currency legislation, and point 3 - an order of application of sanctions.

Objects of currency regulation.

Objects of currency regulation are the currency of Ukraine, securities in currency of Ukraine, currency transactions with currency values.
Further under the term:
"The currency of Ukraine" is understood as actually currency of Ukraine, and payment documents and other securities expressed in currency of Ukraine;

Currency values should be understood as the term:
• Currency of Ukraine - bank notes in a kind treasury notes, coins and in other forms which address and are lawful payment means for territories of Ukraine, and also withdrawn from the reference or such which are withdrawn from it, but are subject to an exchange for bank notes which means for accounts address, in payments in bank and other financial institutions in territory of Ukraine;
• Payment documents and other securities (actions, bonds, coupons to them, checks, bills (the bill of exchange), debentures, letters of credit, checks, bank orders, depositary certificates, savings-bank books, other financial and bank documents), expressed in currency of Ukraine;
Currency values include a foreign currency, securities in a foreign currency, precious metals, natural jewels.
The foreign currency is the monetary unit of any country which are carrying out functions of a currency, payment, cost measurement.
On structure the foreign currency consists from:

a. Bank notes in the form of banknotes and treasury notes, the coins which are in circulation and being lawful payment means in the corresponding foreign state or group of the states, and also withdrawn or withdrawn from circulation, but bank notes subject to an exchange;
b. Means for accounts in monetary units of the foreign states and international monetary or units of account.

The foreign currency is subdivided into currency of the foreign states and the international collective currency.
The currency of the foreign states has the material form. It can be in the form of gold, silver, metal and paper signs. The foreign currency in the form of gold and silver signs is used basically for a collecting.
It is hard the currency which is widely used for realisation of payments on the international operations is considered and is on sale in the main currency markets of the world (1 group of the currencies) Or differently without restrictions exchanges on any other foreign currencies. (The order of the Ministry of external economic relations and trade of Ukraine from 28.01.1999 N 39).
The qualifier of foreign currencies is confirmed by the decision of Board NBU from February, 4th, 1998 N 34). The qualifier of foreign currencies is installed about 16.02.1998 years.
Basically settlement relations of Ukraine with foreign countries if other is not provided by intergovernmental agreements are carried out.
The closed currency is the soft currency which is in use only within the country where the legislation provides restrictions practically by all kinds of currency transactions.
The clearing currency is the special settlement monetary unit applied in foreign trade on the basis of the intergovernmental agreement of two or several states.

Securities in a foreign currency represent:

• Payment documents in a foreign currency (checks, bills, letters of credit, etc.);
• Share values (actions, bonds etc.);
• Other promissory notes expressed in a foreign currency.

"Currency values" are included into a category precious metals. Gold, silver, platinum, metals of platinum group concern precious metals. The structure of metals of platinum group includes a palladium, iridium, rhodium, ruthenium osmium.
Natural jewels which diamonds concern, rubies, emeralds, sapphires, alexandrite, natural pearls are considered as an essential element of currency values.

Settlements under Export and Import Contracts.

The current Ukrainian legislation requires that a Ukrainian resident`s proceeds in foreign currency under an export contract must be collected into such resident`s own bank account within 90 days from the date of the customs clearance of the exported goods. This 180-day period may be prolonged in a limited number of cases, only pursuant to an individual permission granted by the NBU.A resident`s failure to comply with this 180-day requirement may result in the imposition on such resident of a fine in the amount of 0.3% of the amount due under the export contract for each day of delay in receiving the foreign currency proceeds, unless such resident files a claim in court regarding the collection of indebted foreign currency proceeds from a non-resident party.

Similarly, the current Ukrainian legislation requires that goods paid for by a Ukrainian resident, pursuant to an import contract concluded with a nonresident, must be imported and cleared through the Ukrainian customs within 180 days from the date on which such resident`s payment was made. As in the case with an export contract, this 180-day term may be prolonged in a limited number of cases, and the same fine may be imposed if such resident fails to comply with this 180-day requirement.

Transfer Abroad of Foreign Currency from Ukraine.

The Currency Decree sets forth the general rule that any transfer abroad of foreign currency from Ukraine requires an individual license of the NBU, subject to an exhaustive list of exemptions provided in the Currency Decree. Such exemptions include:
- The transfer abroad of foreign currency by a Ukrainian resident individual within the limit determined by the NBU;
- The transfer abroad of foreign currency by a Ukrainian resident or nonresident (legal entity or individual), within the limit of the amount previously imported into Ukraine by such resident or nonresident on a legal basis;
- The payment abroad in foreign currency by a Ukrainian resident (legal entity or individual) in discharge of a contractual obligation in such foreign currency to a non-resident in settlement for goods, services, works, intellectual property rights, or other property rights acquired or received by such resident from such non-resident;
- The payment abroad in foreign currency of interest under a loan or income earned (e.g. dividends) from a foreign investment; and
- The repatriation abroad from Ukraine of the amount of a foreign investment in foreign currency previously made in Ukraine upon the termination of the relevant investment activity.


Price expertise.

Ukrainian foreign currency control legislation generally envisages that any transfer of foreign currency abroad requires prior receipt of the individual license from the National Bank of Ukraine, except for certain exemptions which inter alia include:

- payments to be made by residents of Ukraine in discharge of contractual obligations in foreign currency towards non-residents of Ukraine (e.g, settlements for goods, services, works, intellectual property rights etc.; though an acquisition of securities or other currency valuables does not fall within this exemption, payments for works / services rendered by non – residents of Ukraine require prior receipt of the price evaluation act from the State Information and Analytical Centre for the Monitoring of the External Goods Markets, confirming that such payment does not exceed the “fair market price” for such works / services, if the aggregate amount of such payment exceeds EUR 100.000.00 or its equivalent);
- payments abroad under loan agreements (interest, fees and other costs and expenses under loan agreements are to be made within the limits (caps) set forth by the National Bank of Ukraine);
- income earned from foreign investment (e.g. dividends).