The new Law "On Currency and Currency Operations" No 2473-VІІІ, dated 21 June 2018 (the "Law"), is effective from 7 July 2018, the day following its official publication and, pursuant to its provisions, will apply from 7 February 2019. Adoption of the Law is the first attempt to introduce significant changes to Ukrainian currency control since adoption of the Decree of the Cabinet of Ministers of Ukraine "On System of Currency Regulation and Currency Control" in 1993.
The new Law is aimed to essentially fiberize regulation of the currency transactions substituting as a principle restrictive licensing regime by limited notification in certain cases. The regulation under the Law will be based on the fundamental principle that any transaction is permissible unless expressly prohibited by law. The Law abolishes all types of individual licenses issued by the National Bank of Ukraine (the "NBU"), including licenses for investing abroad, and special sanctions related to temporary restrictions for Ukrainian parties to transact with non-residents in case of certain export-import violations. Under fair interpretation of the Law, its provisions should result in cancellation of the requirement on registration of the loans from non-residents with the NBU.
Despite its progressive nature, the Law still empowers NBU with rather broad currency control functions. The NBU is entitled to introduce the following temporary (up to 6 months, but not longer than 18 months over any 2-year period) restrictive measures in case of (1) banking system financial instability; (2) deterioration of Ukraine's pay balance; and (3) threat to the banking and/or financial stability:
- mandatory sale (conversion into UAH) of certain foreign currency proceeds;
- time limits for settlement under export-import contracts;
- specific requirements for transfer of capital;
- special permits/restrictions for certain currency transactions;
- provisioning for currency transactions, etc.
As the Law will apply only 7 months following the date of its official publication, the NBU is required to approve all necessary implementing regulations within 6 months of this date, i.e., by 7 January 2019. The Cabinet of Ministers of Ukraine together with the NBU shall also prepare and submit to the Parliament of Ukraine bills related to (1) one-time declaration of individuals' assets; and (2) international cooperation of Ukraine in the field of taxation (anti-BEPS measures), namely:
- taxation of the controlled foreign companies;
- country-by-country reporting for the multinational enterprises;
- limiting impact of excessive interest deductions;
- taxation of permanent establishments;
- prevention of tax treaties abuse;
- measures on settlement of disputes arising from implementation of tax treaties;
- international standards on automatic exchange of financial account information.