Ukraine: Further liberalisation of capital controls (dividends and letters of credit)

Ukraine

On 13 April 2017, the National Bank of Ukraine (the “NBU”) issued Regulation No. 33 (“Regulation No. 33”) amending certain existing NBU Regulations regarding currency controls. Regulation No. 33 is part of the on-going liberalisation of capital controls ultimately aimed at improving the business environment in Ukraine. 

Repatriation of dividends for 2016

From 14 April 2017, Ukrainian companies are allowed to purchase foreign currency for paying out dividends distributed between 2014 and 2016 to foreign shareholders. The total amount to be paid shall not exceed USD 5 million per month.

The prohibition on the payment of dividends abroad was first introduced by the NBU in September 2014 to address the difficult economic situation in Ukraine and was extended every 3 months thereafter. In April 2016, the NBU announced its intention to cancel this prohibition, but in June 2016, it only allowed repatriation of dividends paid or accrued in 2014 and 2015 and established monthly caps on amounts of dividends allowed for conversion into foreign currency and repatriation.

Simplified pre-payments for imports

A requirement for the mandatory use of a documentary letter of credit (LC) to make advance payments for the importation of goods/services under a foreign commercial contract now applies to foreign commercial contracts whose total value does not exceed USD 5 million or the equivalent in another currency (as compared to the USD 1 million threshold applied before). 

Please be reminded that the mandatory LC requirement does not apply to the importation of oil, natural gas, non-irradiated fuel elements, electricity, gasoline, fuel oil, diesel fuel oil, military goods and services and any other goods purchased by Ukrainian importers using the funds borrowed from international financial institutions (EBRD, EIB, IFC etc.) or received pursuant to international treaties to which Ukraine is a party. 

Legislation: Regulation of the National Bank of Ukraine “On Introducing the Amendments to Certain Regulations of the National Bank of Ukraine” No. 33 dated 13 April 2017.