National Bank of Ukraine takes steps to relax certain currency control restrictions

The National Bank of Ukraine (the “NBU”) has recently taken a number of steps to relax certain currency control restrictions and it has also announced plans for further liberalisation in the future.

By its Regulation No. 308 dated 5 May 2016, which will become effective on 11 May 2016, the NBU will eliminate the requirement to sell 75% of foreign currency proceeds received by a Ukrainian person as a “foreign investment.” A payment is considered a foreign investment if it is made for the purposes of acquiring shares in a Ukrainian company; purchasing real property, movable property or property rights; or for purposes related to a concession, joint venture, and the like (but loan financing is not deemed to be a foreign investment).

A similar liberalisation measure was recently introduced by the NBU starting from 29 April 2016. Specifically, the mandatory sale requirement no longer applies to proceeds disbursed by a foreign bank directly to a non-resident counterparty of a Ukrainian borrower as payment under an import contract. Previously such exemption applied only in the case of loans granted with the participation of export-credit agencies.

The referenced currency control restrictions were introduced by the NBU in order to stabilise the currency market, and have been in place for about two years now. Also, notwithstanding the above-mentioned liberalisations, the mandatory sale requirement will continue to apply in the case of other foreign currency proceeds - such as export and loan proceeds - until at least 8 June 2016, and may be further extended by the NBU.

The NBU has indicated that it plans to further relax currency control restrictions. For example, on 28 April 2016 the NBU published a press-release stating its intention to lift the current ban on payment of dividends by Ukrainian companies to their foreign shareholders. The NBU requested Ukrainian banks to collect and submit by 20 May 2016 information about their clients’ intentions concerning cross-border dividend payments, including the period to which such dividends relate and the total amount of dividends to be paid. After considering such information, the NBU is expected to set a dividend payments schedule, according to which Ukrainian banks would be permitted to carry out conversion and transfer dividends to foreign investors.

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