On 4 May 2024, new amendments to Regulation of the Board of the National Bank of Ukraine “On the Operation of the Banking System during the Period of Martial Law” No. 18, dated 24 February 2022, came into effect. Such amendments aim to further ease relevant currency control restrictions, including (i) lifting all currency restrictions on imports of works and services, (ii) permitting businesses to repatriate “new” dividends, (iii) easing restrictions on repayment of “new” foreign loans, (iv) allowing payment of interest on “old” foreign loans, and (v) allowing to transfer funds abroad under leasing/rental agreements.
Key changes
1. Payments under import contracts
The National Bank of Ukraine (“NBU”) abolished all currency restrictions on residents’ payments for imports of works and services received from non-residents after 23 February 2021.
To recap, despite the absence of restrictions on payments by residents under import contracts for goods imported to Ukraine after 23 February 2021, a ban on the transfer of funds to pay fines, penalties, damages, and expenses under such contracts had remained in force since the introduction of martial law currency restrictions. However, this ban has now been lifted.
2. Repatriation of dividends
Starting from 13 May 2024, Ukrainian companies (except for banks) will be permitted to repatriate dividends accrued in favour of their foreign shareholders/participants, subject to the following conditions:
(a) dividends are accrued solely based on the results of business activity for the period beginning on 1 January 2024 (however, dividends accrued from retained earnings for previous periods or reserve capital cannot be repatriated); and
(b) payment of such dividends is subject to a monthly limit in the amount of up to EUR1,000,000 or its equivalent in other currency.
3. Interest payments on loans received from foreign lenders before 20 June 2023
Until recently, in relation to foreign loans received by Ukrainian borrowers before 24 February 2022, only payment of interest (i) for the period from 24 February 2022 to 10 August 2022 (inclusive) and (ii) in the amount of no more than 20% of the interest accrued for such period per month, was permitted.
Ukrainian borrowers are now permitted to pay interest on such loans (including any other loans (i) received (in whole or in part) from foreign lenders before 20 June 2023 and (ii) under which relevant borrowers had no overdue debt as of 24 February 2022), subject to the following:
(a) payment of interest, which became due and payable within the period from 24 February 2022 (inclusive) till 1 May 2024, can be made by borrowers in the amount not exceeding EUR1,000,000 or its equivalent in other currency during one calendar quarter; and
(b) payment of interest with a due date falling after 30 April 2024 can be made by borrowers without limits on the amount.
At the same time, Ukrainian servicing banks cannot register any changes in a borrower’s loan documentation in the automated information system “Loan Agreements with Non-Residents” aiming to reschedule dates and amounts of interest payments to the period following 24 February 2022 (inclusive) from other periods preceding this date.
4. Repayment of loans received from foreign lenders after 20 June 2023
From now on, Ukrainian borrowers may use purchased foreign currency for repayment of loans received from foreign lenders after 20 June 2023 upon expiry of the first year of such loan (as opposed to three years under previous rules). During the first year, the Ukrainian borrower must still use only its own foreign currency funds for that purpose.
At the same time, purchase of foreign currency for the payment of interest, fees, and other payments on such loans is no longer restricted.
5. Transfer of funds under leasing and rental agreements
Residents of Ukraine are now permitted to transfer funds abroad to settle payments with foreign leasing and rental companies under leasing and rental agreements. Previously, this permission applied only in relation to payments for leasing or renting transport vehicles.
Additional notes
This LEGAL ALERT is issued to inform AVELLUM clients and other interested parties of legal developments that may affect or otherwise be of interest to them. The information above does not constitute legal or other advice and should not be considered a substitute for specific advice in individual cases.
For further information on this legal alert and other issues regarding currency control restrictions, please contact our Senior Partner, Glib Bondar.
