Ukraine: National Bank of Ukraine set limits on cash payments made by individuals

On 1 September 2013 Resolution No 210 of the National Bank of Ukraine (NBU) (dated 06 June 2013) came into force. This introduced new limits on cash payments made by individuals, which had not previously existed.

The new limit of UAH 150,000 (circa EUR 14,000) applies to:

• same day transactions for the payment of goods and services from individuals to legal entities/private entrepreneurs; and

• any payment required under sale-purchase agreements subject to notarisation (e.g. in relation to immovable property) between individuals.

All payments above the amount of the new limit should be carried out by individuals via cashless transfers:

(i) from the payer’s bank account, directly to the payee’s bank account;

(ii) by depositing funds into/crediting the payee’s bank account; or

(iii) by depositing the funds into a notary’s bank account in favour of the payee.

With respect to settlements between individuals under a notarised sale-purchase agreement, the following was specifically clarified by NBU:

A. The new limit in relation to cashless payments should apply to the whole amount of the notarised settlement sum, irrespective of the amount of each separate payment. This means that the whole amount of the purchase price under an agreement and not only that part exceeding the limit of UAH 150,000 should be paid by a non-cash transfer.

B. The following options in order to make cashless payments of settlements between individuals under notarised sale-purchase agreements were suggested by NBU:

(i) a direct, wire transfer from the buyer’s bank account to the seller’s bank account;

(ii) the buyer opening a deposit bank in the name of the seller and depositing into it the purchase price funds. In this case, the relevant deposit agreement should provide for the execution of the notarised sale-purchase agreement as a condition precedent to such funds becoming then available to the seller, as well as including terms for revocation of the funds to the buyer;

(iii) depositing funds to a notary’s bank account in favour of the seller;

(iv) using a covered non-revocable letter of credit. According to NBU’s clarification, an agreement between the seller and the buyer providing for the use of a letter of credit for the settlement should be in place in order to follow this option; and

(v) depositing funds to the seller’s bank account through a bank’s cash office.

C. A sale-purchase agreement between individuals for an amount exceeding UAH 150,000 should be certified by a notary only upon receipt of confirmation of the parties’ compliance with the requirement as to the payment of a non-cash settlement. Such compliance should be evidenced by copies of relevant payment orders or other similar documents certified by a bank’s authorised representative.

However, clarification and guidance from the NBU still contains some ambiguity. In particular, it appears that the parties to a sale-purchase agreement should first carry out the settlement payments under such an agreement, and only after doing so should they enter into the settlement agreement itself. Additionally, it appears to be impossible for a notary to check the parties’ compliance with the requirements if the settlement agreement provides for a deferred payment in several instalments. Consequently, it is therefore not clear whether the notary would be in position to notarise the agreement on such terms. This, on its face, seems to be somewhat irrational, in particular from a legal standpoint. It also may be not in line with the parties’ interests and their commercial intention, as well as limiting the remedies available to the parties by law to protect their rights.

According to NBU, the implementation of these limits on cash payments should increase the number of non-cash transactions in Ukraine, reduce the expenses for servicing cash payments, and, generally, favourably impact liquidity in the banking system of Ukraine. It should also further unshadowing businesses in Ukraine, as well as enhancing GDP growth.

By this Regulation No 210, the NBU also amends Regulation No 637, dated 15 December 2004, ‘On Cash Operations in National Currency of Ukraine’. This Regulation has been amended to the effect that the amount of cash settlements made by legal entities/private entrepreneurs to individuals will also be limited by NBU. However, NBU has not yet established such a limit. Hence currently, cash payments from legal entities/private entrepreneurs to individuals are not limited, however it is highly probably that such a limit may be established in the future.

Legislation:

NBU Resolution No. 210 dated 6 June 2013 ’On Establishing Limits for Cash Settlements’ also amending the NBU Regulation No 637 dated 15 December 2004 ‘On Cash Operations in National Currency of Ukraine’.