On 7 June 2016, a day before the expiry of the then effective currency control restrictions temporarily introduced in 2014 and 2015, the National Bank of Ukraine (the NBU) extended the restrictions for another three-month period, albeit with some concessions. The key restrictions (each subject to certain exemptions) remaining in place include:
- prohibition on early repayment of cross-border loans by Ukrainian borrowers;
- general restriction on repatriation of dividends by foreign investors (now excluding 2014 and 2015 dividends – please see below for details);
- mandatory conversion of 65% of foreign currency proceeds received from outside of Ukraine (please also see below for details);
- ban on repatriation of proceeds from sale of Ukrainian securities and shares in limited liability companies by foreign investors.
2014 and 2015 dividends allowed for repatriation
With effect from 13 June 2016, the NBU allowed repatriation of dividends paid or accrued for 2014 and 2015 (the general dividend repatriation ban remains in place). In order to mitigate a surge in demand for foreign currency, the NBU established monthly caps on amounts of dividends allowed for conversion into foreign currency and repatriation. Depending on the aggregate amount of 2014-2015 dividends to be repatriated, the following monthly caps apply:
- USD 1 million cap – if the aggregate amount is below USD 10 million;
- a cap of 10% of the aggregate amount of repatriated dividends – if such aggregate amount is between USD 10 million and USD 50 million;
- USD 5 million cap – if the aggregate amount of repatriated dividends is above USD 50 million.
The NBU resolution is unclear as to whether, for the purposes of determining a cap, the aggregate amount of dividends for repatriation is calculated on a per-investor basis (i.e., aggregating dividends from all entities where shares are held by an investor) or a per-company basis (i.e., treating each dividend paying entity separately). Fair reading of the resolution suggests that this would depend on whether conversion and repatriation is carried out by an investor himself (after receiving dividends in Ukrainian hryvnia in its investment account with a Ukrainian bank) or by a company making payment of dividends directly to a foreign account of the investor. As a result, in certain cases of multiple shareholdings, proper structuring of dividend payment may allow taking advantage of a combination of caps to maximise the monthly amount of dividends available for repatriation.
In order to convert and/or repatriate the dividends, an investor (its securities custodian) or a company making payment of dividends will need to provide regular supporting documents to its servicing bank: evidence of a shareholding (e.g., a charter in case of a limited liability company or a securities account statement in case of joint-stock company) and a corporate resolution of the respective Ukrainian company approving payment of dividends.
Share of foreign currency proceeds mandatory conversion reduced from 75% to 65%
With effect from 9 June 2016, share of foreign currency proceeds received from abroad and subject to mandatory conversion into Ukrainian hryvnia was reduced from 75% to 65%.
The conversion requirement applies to proceeds in major convertible currencies (including USD, EUR, GBP and CHF) and Russian rouble received from abroad by legal entities (excluding Ukrainian banks) and individual entrepreneurs. Proceeds in above foreign currencies credited to accounts of joint ventures opened with the Ukrainian banks or accounts opened by the Ukrainian residents outside of Ukraine are also subject to mandatory conversion.
The requirement does not cover certain types of proceeds, including foreign investment proceeds, proceeds received by the State or under State-guaranteed instruments, borrowings from international financial institutions to which Ukraine is a member, funds in correspondent accounts and deposits of foreign banks with Ukrainian banks, etc.
Certain other changes to currency control restrictions
- Maximum amount of cash foreign currency or bank metals which one individual may purchase in one bank during one banking day was increased from the equivalent of UAH 6,000 to the equivalent of UAH 12,000.
- The permitted amount of withdrawal by a bank’s client of cash foreign currency or bank metals from its accounts was increased to the equivalent of UAH 100,000 per day.
- The restriction on withdrawal of cash in hryvnia from bank accounts has been completely removed (previously a UAH 500,000 daily limit was in place).
For more information, please contact Nazar Chernyavsky, Anton Korobeynikov or Olexander Olshansky.