National Bank of Ukraine Continues to Liberalize Currency Control Measures

On 7 June 2016, the National Bank of Ukraine (the “NBU”) issued Regulation No. 341 (“Regulation No. 341”, coming into force on 15 June 2016) and Regulation No. 342 (“Regulation No. 342”, partially in effect since 9 June 2016, and in full effect starting 13 June 2016) amending a number of earlier NBU Regulations, including the NBU Regulation No. 502 dated 12 December 2002 “On Organization and Implementing Foreign Currency Exchange Operations at the Territory of Ukraine” (“Regulation No. 502”). Both Regulations No. 341 and No. 342 are aimed at liberalization of currency control measures earlier imposed by the NBU, and are expected to have an overall positive impact on the business environment and especially on foreign investors, who can now utilize their right for receiving dividends from Ukrainian issuers.

Payment of dividends abroad

Starting 13 June 2016, Ukrainian issuers shall be allowed to purchase foreign currency with the purpose of payment of dividends distributed for 2014-2015 to shareholders residing / domiciled abroad, however, only if all of the following conditions are met:

• Purchase of foreign currency for the aforesaid purpose and payment of dividends is done by the issuer or by a local depositary institution servicing the relevant foreign investor or by the foreign investor itself (having an investment account in Ukraine);
• A total amount payable as dividends to a single foreign shareholder should not exceed the higher of USD 1 million or 10% of all dividends such shareholder is entitled to, however not more than USD 5 million within one month;
• Purchase of foreign currency with the said purpose and payment of dividends should be done through the same servicing bank.

Mandatory sale of foreign currency earnings drops from 75% to 65%

From 9 June 2016 and effective until 14 September 2016, 65% of earnings in foreign currency received from abroad will be subject to mandatory conversion by servicing banks into the local currency (subject to certain exceptions), instead of earlier 75% conversion requirement. Such conversion shall be made by the servicing banks on the day following the receipt of the amounts in foreign currency and without any prior authorization from the clients.

Expedite procedure of purchase of foreign currency by companies

From 9 June 2016 and effective until 14 September 2016, the minimum term for reserving the funds in UAH by a servicing bank for purchase of foreign currency on behalf of its client is reduced from three to one business day following the day when the relevant amount in UAH is credited by the client to a bank's internal (analytic) account. A servicing bank is still under the obligation to include foreign currency transactions in the register of transactions and submit it to the NBU for its ultimate confirmation. The term for the NBU’s confirmation of the above transactions is still three business days.

Increased limit for cash withdrawal in foreign currency

From 9 June 2016 and effective until 14 September 2016, the limit on cash withdrawals in foreign currency from the bank accounts are set in the equivalent of UAH 100,000 (instead of earlier effective limit of UAH 50,000) based on the official NBU rate, currently totalling to approximately USD 4,000 as of the date of this publication.

No limit for cash withdrawal in local currency

From 9 June 2016 and effective until 14 September 2016, no limit for UAH cash withdrawal from bank accounts will apply (instead of earlier effective limit of UAH 500,000).

Other novelties starting from 15 June 2016

Commercial banks are granted the right to re-establish their FX rates multiple times in the course of one banking day, which was previously prohibited by the NBU. Furthermore, different branches of the same servicing bank are allowed to establish different FX rates.

Commercial banks shall be allowed to use their own FX rates in operations on cash conversion from one currency to another, whereas in the past such conversions have been allowed only on the basis of official NBU rate.

Legislation:

Regulation of the National Bank of Ukraine “On Introducing the Amendments to Certain Regulations of the National Bank of Ukraine” No. 341 dated 7 June 2016.

Regulation of the National Bank of Ukraine “On Regulating Situation on Monetary Market and Currency Market of Ukraine” No. 342 dated 7 June 2016.