As of February 7, 2019 the new system of currency market regulation comes into effect. By this article we would like to outline the key innovations of currency legislation, system of introduced regulatory legal acts, and we will try to provide an assessment to the process of currency liberalization.
Under EU-Ukraine association agreement, the Ukraine’s path towards systematic mitigation of currency regulation with the following restriction removal was established. By 2021 Ukraine should harmonize the legislation in accordance with the requirements of the EU.
Thus, the first solid step towards the liberalization of currency regime was the adoption in summer 2018 of the uniform regulatory legal act of the currency legislation – Law of Ukraine “On Currency and Currency Operations” № 2473-VIII dated 21.06.2018 (hereinafter – the Law). The Law comes into force on 07 February 2019 and is established the new system of currency regulation.
The main idea of changes is to allow everything that is not prohibited by the law. Versus the obsolete On System of Currency Regulation and Currency Control that was ruled by the principle of prohibitions and restrictions, the new act introduces the freedom of action within the framework of restrictions that are directly prescribed by the law.
Consequently, previously established prohibitions have been changed. There is intended to:
- Abolish the obligation to declare the currency valuables. Hence, there is no need to file the declarations on currency valuables and other property abroad.
- Cancel individual licenses for investments (acquisition of property/securities, incorporation of legal entities, credits in a foreign currency). Today individuals and legal entities are not limited in right to open foreign accounts. (p.2 art. 2 of Law on Currency)
- Abolish the requirement to register at the National Bank of Ukraine(NBU) the granted/raised credits from non-residents.
- Lift special sanctions for failure of the payments for international transactions – temporary termination of the business activity.
- Transfers of private individuals abroad that do not exceed 150,000 UAH (in one operation day, without evidence of division) do not require account opening and providing the supporting documents (previously the limit was 15,000 UAH).
- From now, private individuals can purchase foreign currency and banking metals online at the amount that does not exceed 150,000 UAH per day.
- Legal entities can purchase banking metals without physical delivery at the amount that does not exceed 150, 000 UAH per day.
Concurrently with the Law, numbers of regulations accepted by the resolutions of the NBU that amplify and specify the Law accordingly to different spheres of currency market are coming into effect:
- Regulation on the Structure of the Currency Market of Ukraine and Rules and Procedure for Trading in Foreign Currency and Investment Metals in the Currency Market of Ukraine;
- Regulation on the Conduct of Operations With Currency Valuables;
- Regulation on Moving Currency Valuables Across the Border;
- Regulation on the List of Safeguard Measures, the Procedure for Their Implementation, Extension, and Early Termination Regulation on specific stabilization instruments of monetary market;
- Regulation on Safeguards and Procedures for Certain Currency Transactions;
- Regulation on the Certain Instruments for Stabilizing the money market;
- Regulation on the Procedure for the Currency Supervision of Residents’ Compliance with Settlement Deadlines in Goods Export and Import Operations.
Although the Law is acts for to liberalization, the abovementioned regulations leave in effect some restrictions of currency regulation:
- The term “Currency control” is replaced by the term “Currency supervision”. Whereas previously all the operations of purchase and transfer of foreign currency were subject to control, now the operations that exceed 150,000 UAH will require carrying out of the supervision.
- The settlement period for export/import transactions is increased from 180 days to 365 days. Herewith, for transactions that were to be settled before 06.02.2019 and were not executed, the period of 180 days is applicable.
- Currency supervision continues to act at the mutual settlement of operations.
- The automated system of E-limits replaced the individual licenses. However, there are established limits of the foreign currency transferred abroad: 2 mln. EUR/year for legal entities, 50,000 EUR/year for individuals.
- There is continue to act the restriction on dividends distribute abroad in foreign currency at the amount over EUR 7 mln. per month and the repatriation of investments (sale of corporate rights and unlisted securities) – at the amount over EUR 5 mln. per month.
- It is prohibited to provide credits (loans) in hryvnias to non-residents.
- The legal entities obligation to sell 50% foreign currency incomes is remained.
- It is still prohibited to purchase foreign currency out of international agreements or for credit facilities.
- Failure by residents of the deadlines for international payments is subjected to penalty in the amount of 0,3% of the debt per each delayed day.
Thus, with establishment of the new system of currency regulation, the currency market remains substantially regulated.
However, we believe that with the EU support, the Ukrainian currency market will become less restrictive and more open.
As such example, from the 07th of February 2019 private individuals are able to purchase and sell currency through mobile applications.
At the moment, it can be noted that the new system of currency regulation will provide numerous opportunities for large business and will help to eliminate inconveniences for ordinary citizens.
Prepared by Evgenia Krykhtina