Legal alert. Substantial easing of FX restrictions in Ukraine
On the 3rd of May 2024, the National Bank of Ukraine (the “NBU”) adopted the Resolution No. 56, which substantially overhauled the applicable regime of FX restrictions in Ukraine in line with the Strategy for Easing FX Restrictions adopted by the NBU in 2023. The new package of simplifications has been introduced to improve business environment for companies, operating in Ukraine and, thereby, increase investment inflows into the country.
Starting from the 4th of May 2024, the following outbound FX transactions are permitted:
outbound payments for imports of any works and services. Accordingly, outbound payments for imports in their entirety (i.e., any goods, works and services) are permitted, provided that they were or are being imported after the 23rd of February 2021. Previously, outbound payments for imports were subject to a list of critical imports adopted by the Cabinet of Ministers of Ukraine, which, while formulated broadly, still contained certain restrictions as to the types of services or works allowed to be paid for;
outbound payments by legal entities and private entrepreneurs under financial leasing / rental agreements, regardless of the type of asset underlying it or the date of the agreement. Previously, only outbound payments under car finance lease / car rental agreements were allowed;
outbound interest payments under loan agreements, where funds have been fully or partially disbursed to borrowers’ accounts in Ukrainian banks from abroad before the 20th of June 2023, subject to the following conditions: (i) the interest payment dates specified in the loan agreement fall on the dates starting from the 24th of February 2022, inclusive, (ii) as of the 24th of February 2022, the borrower had no overdue debt under the loan agreement, (iii) outbound payment of the interest accrued and overdue as of the 1st of May 2024 shall be limited to the equivalent of EUR 1 million in a calendar quarter, while the payment of interest accrued and to be paid after 30th April 2024 is not limited, etc.;
outbound payments by representative offices of international payment systems and foreign airlines to their parent companies, provided that the payments are limited to the equivalent of EUR 5 million a month.
Additionally, the NBU has also simplified restrictions on repayment of the short-term (maturity of up to 1 year) and long-term (maturity over 1 year) cross-border loans, disbursed to Ukrainian borrowers from abroad after the 20th of June 2023, in particular:
Ukrainian borrowers can use only their own FX funds for repayment of principal on such short-term loans. Accordingly, the FX funds purchased in the Ukrainian FX market cannot be used for this purpose.
Ukrainian borrowers can use only their own FX currency for repayment of principal on such long-term loans in the first year of the loans’ tenor. Thereafter, they may use both own and purchased FX funds for repayment of the principal amount of such loans.
Ukrainian borrowers may use both own or purchased FX currency for payment of interest, commissions and other ancillary payments on short-term and long-term loans.
Starting from the 13th of May 2024, the outbound repatriation of new dividends will also be partially permitted for the first time since entry into effect of martial law in Ukraine, subject to the following conditions:
the dividends are declared out of the business results achieved from the 1st of January 2024 onwards. Outbound payment of dividends for the previous periods is prohibited;
a monthly limit on the repatriation of dividends is set at the equivalent of EUR 1 million;
the outbound payment of dividends is made either directly to the accounts of foreign investors, or via depository system.
We will closely monitor and inform you about any further major changes to the applicable regime of FX restrictions in Ukraine.
For any further information on this matter, please contact: Yulia Kyrpa, executive partner, Head of Banking & Finance and Real Estate.