NBU eases exchange and capital controls

On May 3, 2024, the National Bank of Ukraine has significantly eased the existing currency restrictions by amending Resolution of the NBU Board No. 18 "On the Operation of the Banking System during the Period of Martial Law" (Resolution No.18).

Firstly, NBU has allowed residents to make payments abroad for any works and services rendered by non-residents

Previously, residents were able to pay solely for works and services expressly specified in the Cabinet of Ministers of Ukraine (CMU) Resolution No. 153 "On Certain Issues of Ensuring Import" dated 24 February 2022 (Resolution No.153). In addition, residents may now pay fines, penalties, bonuses, reimburse expenses and damages under the import contracts provided that the delivery under such contracts was/is being made after 23 February 2021. Same applies to expenditures from the state budget.

A separate provision now permits payments by legal entities and individual entrepreneurs under rental and leasing agreements - without limitation as to the subject matter of the agreement and the period of provision of such services.

Secondly, restrictions on the repayment of loans to non-residents have been eased

In particular, the NBU has allowed payment of interest under so-called “old” loans (that is loans disbursed prior to 20 June 2023) subject to the following conditions:

• a loan (in whole or in part) was actually disbursed before 20 June 2023 (inclusive)
• an interest payment date falls on any day after 24 February 2022 (inclusive)
• a borrower had no overdue debt under the loan as of 24 February 2022
• interest on arrears accrued between 24 February 2022 and 1 May 2024 under one loan agreement may be paid up to an amount not exceeding EUR 1,000,000 (or its equivalent in another currency) per one calendar quarter
• prepayment of interest, including by way of rescheduling interest payment dates, is not permitted
• residents may not pay interest from the proceeds under loans and borrowings (including repayable financial aid) received from other residents.

As regards so-called "new" loans (specifically, loans disbursed after 20 June 2023), certain restrictions on the purchase of foreign currency by borrowers remain in place, but the NBU has eased some of the requirements, namely:

• Previously, the residents were permitted to repay cross-border loans with a tenor of up to three (3) years exclusively at the expense of their own foreign currency proceeds. The NBU has now reduced the term to one (1) year. The NBU has also clarified that interest and other payments under such loans may be paid either from own foreign currency proceeds or with the purchased foreign currency. At the same time, repayment of such loans from borrowings received from other residents is expressly prohibited.
• For loans and borrowings with a maturity of more than one (1) year (previously – three years), the principal amount may be repaid from own foreign currency proceeds during the first year after the first drawdown, and thereafter – without restrictions as to the sources of such funds. Payment of interest and other payments may be carried out in a similar manner as indicated in the above paragraph.

Thirdly, with effect from 13 May 2024, residents are permitted to pay dividends to foreign investors abroad provided that the following conditions are satisfied simultaneously:

• such dividends should be accrued for the period beginning from January 1, 2024 (excluding dividends from undistributed profits for previous periods/reserve capital)
• payment of dividends should be made by the issuer of corporate rights/shares
• transfer of dividends should be made directly to the accounts of the foreign investor/non-resident abroad and/or through the depositary system of Ukraine
• the amount of dividends paid during a calendar month must not exceed EUR 1,000,000 (or equivalent in another currency)

Fourthly, the NBU has expanded the possibilities for purchasing foreign currency at the request of state executors

Now, the purchase of foreign currency by state executors shall be permitted using funds collected from the state, state-owned enterprises, legal entities fully owned by the state, provided that they are transferred to the accounts of the state executor opened in Ukraine. Private executors do not yet have such right.

Fifthly, representative offices of foreign airlines and international card payment systems now have the right to transfer foreign currency to the bank accounts of non-resident legal entities whose interests such representative offices represent in Ukraine

In this way, the NBU has allowed the purchase and transfer of foreign currency abroad in favor of parent companies, provided that such transfers do not exceed EUR 5,000,000 (or equivalent in another currency) and are made only through one bank chosen by the representative office (change of bank is possible, but requires satisfaction of certain procedural requirements).

Additionally, the NBU has expanded the list of membership fees to international organizations or other non-resident legal entities which the residents are permitted to pay (previously, mainly payments from insurers and state sector enterprises were possible), allowing for the payment of airport, port, and road fees, as well as some other niche payments (in particular, in the field of sports activities).

The above changes are expected to facilitate the attraction of investments in Ukraine and the gradual increase in export revenues of Ukrainian businesses.

Source: bank.gov.ua