The main purpose of foreign exchange control in Ukraine is to prevent illegal capital flow and ‘dollarization’ of the domestic economy. Operations with foreign currency are regulated by the Decree of the Cabinet of Ministers “On the System of Currency Regulation and Currency Control” and a number of rules issued by the National Bank of Ukraine (NBU).
Currency control is founded on the following basic rules:
- Payments under foreign trade contracts between a non-resident and a resident entity should be effected only in foreign currency unless a non-resident has an investment account in Ukrainian currency;
- In case of payments by Ukrainian business entities for services rendered by non-residents for amounts exceeding EUR 100,000 (annually) it is required a confirmation from the Foreign Markets Monitoring Centre (FMMC) that the fee for the services does not exceed market prices;
- Ukrainian companies generally must receive payments for exported goods or services within 90 (in some cases 180 days) from the date of customs clearance of goods or date of services delivery. In compliance with this rule goods/services purchased from abroad have to be actually delivered to Ukrainian counterpart within 90 (180) calendar days from prepayment. Failure to do so without authorization from the NBU may result in a fine of 0.3% of the customs value of goods (services) paid for each day of delay;
- Salaries must be paid only in the national currency, but expatriate employees can be paid in hard currency;
- Foreign loans must be registered by the National Bank before they are received. The maximum allowable interest rates for foreign fixed rate loans in hard currency is 9.8% p.a. for loans up for 1 year; 10% p.a. for loans for 1-3 years and 11% p.a. for loans over 3 years. For loans with floating interest rates, the maximum allowable interest rate is three months USD LIBOR plus 7.5%;
- In most cases payments in foreign currency between residents are not allowed in Ukraine (or a specific license is required);
Ukrainian entities are required to obtain a license from the NBU for different operations with foreign currency, including:
- Opening bank accounts with foreign banks;
- Establishment of a subsidiary company in another country and transferring capital to fund its operations;
- Purchase of foreign securities or Ukrainian securities from non-residents.
Note: The individual license from the NBU generally is not required in case of transferring foreign currency for investment medium from running account of a resident or from investment account of foreign investor to investor’s account in a foreign bank.
Repatriation of foreign currency dividends or invested capital
Foreign investors are guaranteed the right to repatriate their legally obtained profits or other funds from their investments in Ukraine. For such purpose investors are permitted to convert local currency into foreign currency. After the payment of applicable taxes, a foreign investor may effect the conversion through the Ukrainian Inter-bank Currency Exchange (UICEX). An investor requests his commercial bank to participate in the UICEX auction; the bank receives a conversion request from its client, reviews the basis of the request and participates in the auction to purchase the currency on behalf of its client.
Note: At present the Ukrainian currency is not fully convertible. But in order to progress towards that goal significant measures have been undertaken. Currently, the USD, EUR, and RUB are being traded on the UICEX daily.
Also, it is very important to know that it is possible to invest only in the currency specified in the 1st group of the Classifier of foreign currencies (*see the full list of the currencies from this group in the Procedure of foreign investment in monetary form).
Repatriation of funds may be effected (only in foreign currency specified in the 1st group of the Classifier):
- by a resident from a current foreign exchange account to an investment account of a foreign investor or to an account of investor in foreign bank;
- by a resident from an account in the national currency (UAH) to an investment account of a foreign investor in the national currency;
- by a foreign investor from an investment account in foreign currency to his own account beyond the borders of Ukraine;
- by a foreign investor from his investment account in the national currency and foreign currency to an investment account of other foreign investor;
- by a foreign investor from an deposit account (investment deposit) in the national currency and foreign currency to his own foreign investor’s investment account and from an deposit account in foreign currency to his own investor’s investment account in a foreign bank;
- by a person in charge from an account of joint investment activity in the national currency and foreign currency to an investment account of foreign investor or from an account of joint investment activity in foreign currency to an account of investor in foreign bank.
Also, in case of property investments foreign investor has the right of full or partial return in currency of such investments including those that were effected by means of running a joint investment activity without establishing a legal entity.