On November 6, 2012, the Parliament of Ukraine passed the law authorizing the National Bank of Ukraine ("NBU") to introduce a temporary requirement on mandatory conversion of a foreign currency transferred to Ukraine from abroad. The law came into legal effect on November 16, 2012 and on the very next day the NBU adopted several regulations that reinstate stricter requirements for the foreign currency conversion. These regulations impact eventually all international businesses as well as individuals that receive foreign currency from abroad.
In particular, the NBU Regulation No. 475 as of November 17, 2012 implemented the rule that foreign currency proceeds of the export or import contract should be credited to the bank account of the Ukrainian resident within 90 days after the document evidencing the provision of services or supply of produces was executed. Effectively, the time limit for the contractual payment delay was cut in a half. This is reminiscent of the similar situation that occured during the global financial downturn hit on Ukraine in 2009.1
Thus, it seems necessary for business companies to revise terms of their supply contracts for products or services in order to ensure timely performance of the 90 days rule. Otherwise, the company may be penalized with a fine of 0.3% of the amount of the foreign currency not timely returned to Ukraine. Since the fine is calculated pro rata to the number of days of the delay, it could reach significant amounts, up to the equivalent of the unpaid or delayed sum.
The NBU Regulation No. 475 also introduced the requirement for the mandatory sale of export contract proceeds in a foreign currency. A similar requirement existed in Ukraine since 1998, after the drastic depreciation of the national currency, although it was eventually cancelled in 2005. Now Ukrainian banks are again required to make mandatory sale of the foreign currency at the interbank currency market within the next business day after the amount was credited to the transit bank account of the client. Since the bank would do the sale based on the regulation requirement, no action of the bank's client would be necessary to authorize such conversion of the foreign currency into Hryvnia. The requirement applies to all currencies of the First group of the Currency Classification (that includes all major freely traded currencies) and Russian Rubles.
The NBU defined in a separate Regulation No. 479 as of November 17, 2012 that 50% of the foreign currency income on the foreign economic contract shall be subject to such mandatory sale at the interbank currency market. The requirements of Regulations No. 475 and No. 479 shall be valid for 6months, i.e., until May 19, 2013.
Further, the NBU Regulation No. 476 as of November 17, 2012 provided formandatory sale at the interbank currency market of the foreign currency transfers received by an individual, either a foreigner or a Ukrainian resident. This rule applies if the amount of the foreign currency received exceeds the equivalent of UAH 150,000 (approx. USD 18,750) per month. Similarly to the regulations discussed above, the bank is authorized to do such conversion without the involvement of the client and on currencies of the First group of the Currency Classification (that includes all major freely traded currencies) and Russian Rubles. The Regulation No. 476 comes into legal effect on November 27, 2012 and shall remain valid until May 27, 2013.