The National Bank of Ukraine significantly eases currency restrictions for business

Contents

  1. The abolishment of all currency restrictions on imports of goods and services
  2. The restoration of distribution of dividends to non-residents
  3. The possibility to transfer funds abroad under leasing/rental agreements
  4. Liberalization of the loans and interest repayment rules
  5. Abolishment of the restriction on the transfer of foreign currency from representative offices in favour of parent companies
  6. Conclusions

On May 03, 2024, Resolution of National Bank of Ukraine No. 56 adopted significant changes to the regulation of currency restrictions. This is the largest package of easements of currency restrictions for Ukrainian businesses since the beginning of the full-scale invasion. According to the Resolution, most of the provisions came into force on May 4, 2024. However, the provisions relating to the repatriation of dividends becameeffective on May 13, 2024.

The main changes include:

The abolishment of all currency restrictions on imports of goods and services

The NBU has renewed the ability of businesses to purchase and transfer foreign currency abroad for import of any goods and services, including payment of remuneration under license agreements (royalties). 

Due to the introduced changes, Resolution of the CMU No. 153,dated February 24, 2022, loses its relevance and will be terminated. 

It worth noting that residents are obliged to use purchased foreign currency within two business days upon it’s crediting to their bank account, and the maximum settlement periods for export and import operations still remains at 180 days.

The restoration of distribution of dividends to non-residents

As of now, businesses will again be able to pay dividends toforeign investors, but from profits earned after January 1, 2024. To ensure financial stability, the NBU has limited the monthly amount of dividends to EUR 1 million. All transactions will be controlled through the E-limits system. 

Meanwhile, the payment of dividends from undistributed profitsfor previous periods remains blocked.

The possibility to transfer funds abroad under leasing/rental agreements

Legal entities and individual entrepreneurs are now able to payabroad under leasing or rental agreements without restrictions, regardless of the subject matter or date of the transaction. The amendments expand the previous rules, which were limited to vehicles only, and will facilitate both new transactions and the import of business equipment into Ukraine.

Liberalization of the loans and interest repayment rules

In particular, the minimum term for using loans received from non-residents after June 20, 2023, upon expiration of which it is allowed to purchase foreign currency to repay such a loan, is reduced from three to one year. This means that Ukrainian borrowers can now buy foreign currency to service or repay such loans after one year from receiving the principal amount, rather than waiting three years, as it was before.

Furthermore, businesses can purchase foreign currency to pay interest on loans received after June 20, 2023, regardless of the term of the loan.

At the same time, Ukrainian companies that have “old” loan obligations to foreign creditors have been allowed to transfer funds abroad to pay loan interest. This decision applies to payments that could not be executed due to the restrictions on international transactions introduced on February 24, 2022.According to the new rules, companies may transfer up to EUR 1 million in equivalent for each calendar quarter to settle interest payments which are overdue as of May 1, 2024. However, this restriction will not apply to future scheduled interest payments. 

To ensure macroeconomic stability, additional conditions for enabling such operations are provided:

  • the Ukrainian company-debtor had no overdue debts as of February 24, 2022, which means that it was a reliable debtor before the restrictions were imposed;
  • purchase and fund withdrawal at the expense of loans from residents is prohibited;
  • there is no provision for prepayment or restructuring of overdue payments.

Abolishment of the restriction on the transfer of foreign currency from representative offices in favour of parent companies

Now, representative offices of international payment systems and airlines can transfer up to EUR 5 million per month to their parent companies. This decision is aimed to support the development of cashless payments in Ukraine.

The NBU emphasized that these changes have already been taken into account in the updated macroeconomic forecast, which provides for the preservation of international reserves this year and next year at a level close to the current one (USD 43-44 billion). 

Conclusions

From our point of view, the introduced changes are generally long awaited by Ukrainian businesses and foreign investors. The new regulation will facilitate international trade, attract investment, increase the level of the Ukrainian business financing form abroad and boost market entry by foreign investors. Undoubtedly, it is a positive step.

The article was written by: 

Oleksandr Melnyk

Partner, Head of Corporate Law and M&A practice, Attorney at law

Nazarii Zeliak

Associate of Corporate Law and M&A practice at GOLAW

Daniil Antoniuk

Paralegal of Corporate Law and M&A practice at GOLAW

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Oleksandr Melnyk

Oleksandr Melnyk

Partner, Head of Corporate Law and M&A practice, Attorney at law

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