Key changes
In a major update of the martial law currency restrictions, which were initially imposed in February 2022 following the full-scale Russian invasion, the National Bank of Ukraine (NBU) has implemented measures to further liberalize cross-border payments from Ukraine.
The new rules, effective from 4 May 2024, concern the following cross-border payments:
- Payments for services, works and IP rights
- Repatriation of dividends
- Interest payments under "old" cross-border loans
- Payments under "new" cross-border loans
- Payments by certain Ukrainian rep offices to their foreign HQs
- Rent/lease payments
Payments for services, works and IP rights
The NBU has abolished the rule under which Ukrainian businesses were allowed to pay abroad only for those services, works and intellectual property rights that were listed in the government's list of eligible services (per CMU Resolution No. 153 of 24 February 2022).
From now on, Ukrainian businesses can buy and transfer foreign currency abroad for payments related to any services, works and IP rights, provided these were rendered after 23 February 2021. All such payments will be subject to the standard transaction checks and KYC procedures of Ukrainian banks, as is customary for enabling cross-border payments from Ukraine.
Dividend repatriation
Starting from 13 May 2024, Ukrainian companies can pay dividends accrued for FY 2024 (i.e., calendar year 2024) to their foreign investors abroad.
Investors can repatriate dividends up to the equivalent of EUR 1 million per calendar month.
This rule does not apply to dividends accumulated from retained profits for previous financial periods or from reserve capital. Therefore, repatriation of dividends for previous financial years remains prohibited as yet.
Interest payments under "old" cross-border loans
Ukrainian borrowers can now pay interest to foreign creditors on their "old" cross-border loans (i.e., those received before 20 June 2023), provided that all of the following conditions are met:
- The loan was received by the borrower into its Ukrainian bank account before 20 June 2023.
- Under the loan agreement, interest payment dates occur after 24 February 2022.
- The borrower was not in default on its loan as of 24 February 2022.
- Under one loan agreement, the borrower can pay interest that was overdue as of 1 May 2024 up to the equivalent of EUR 1 million per calendar quarter. This limit will not apply to interest payments that become due after 30 April 2024.
- Payments must not precede the payment date specified in the relevant loan agreement.
- Funds used to purchase foreign currency and pay the relevant interest payments abroad must not be borrowed under a loan from a Ukrainian creditor.
Repayment of principal under the "old" loans remains prohibited as yet.
Payments under "new" cross-border loans
The NBU has simplified conditions for local borrowers to purchase foreign currency to service and repay "new" cross-border loans (i.e., those attracted after 20 June 2023).
Specifically, the minimum maturity term of a "new" loan, upon reaching which it is allowed to buy foreign currency to repay such a loan, has been reduced from three years to one year. Accordingly, the prohibition on purchasing foreign currency to repay "new" loans now applies only to short-term loans with a maturity of up to one year.
Additionally, Ukrainian borrowers are permitted to buy foreign currency to pay interest on "new" loans regardless of the loan maturity.
We previously reported on the rules for making payments under the "new" cross-border loans — access this information here.
Payments by certain Ukrainian rep offices to their foreign HQs
Ukrainian representative offices of international card payment systems and foreign airlines are allowed to purchase and transfer foreign currency abroad to their foreign headquarters' accounts.
Such cross-border transactions (by each representative office of a company) are capped at the equivalent of EUR 5 million per calendar month.
Rent/lease payments
Businesses can now transfer funds abroad to pay under leasing and rental contracts without additional restrictions on the scope of the lease/rental or the date of the relevant contract. Previously, payments were allowed only for the leasing or renting of transport vehicles.
Background information
With the introduction of these new currency liberalization measures, the NBU has moved to implement the second stage of its three-stage Strategy for the Liberalization of Existing Martial Law Foreign Exchange (FX) Restrictions, unveiled in 2023. Although non-binding, this document provides insights into the NBU's potential plans for easing the current strict capital controls. The strategy outlines a general roadmap for lifting FX restrictions, without specifying exact timelines.
If the financial climate in Ukraine remains stable, the NBU intends, in the third stage of the strategy, to fully permit payments under cross-border loans and investments, to liberalize derivative transactions, and to allow investments abroad, as well as to permit local creditors to grant loans to foreign borrowers.
Context
These recent changes have been enacted under the ongoing martial law regime, instituted in Ukraine on 24 February 2022. Martial law has resulted in significant capital outflow restrictions and stricter foreign exchange controls.
Currently, the overall foreign exchange regime in Ukraine remains highly restrictive, and transactions not explicitly permitted by the NBU are prohibited during the martial law period or until the NBU lifts the relevant restrictions.
