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Obligatory selling of cash receipts in foreign currency

Hereby we inform you that on the 23rd of December 2010 the Decree of the Board of National Bank of Ukraine No 457 dd. 08/12/2010 “On amending certain normative acts of National Bank of Ukraine” (hereinafter referred to as the “Decree”) will come in force. In result of this the obligatory selling of 50 % of profit in foreign currency will be adopted.

The mentioned Decree amends few legal acts issued by the National Bank of Ukraine including the Decree of the Board of National Bank of Ukraine No 101 dd. 31.03.2005 “On cancellation of obligatory selling of cash receipts in foreign currency in favour of the residents” (making it stale) that had cancelled the Decree of the Board of National Bank of Ukraine No 349 dd. 04/09/1998 “On obligatory selling of cash receipts in foreign currency in favour of the residents approval” (hereinafter referred to as the Decree on currency selling”).

The Decree on currency selling provided that 50 % of the cash receipts in favour of the residents (legal entities and private entrepreneurs) in foreign currency of the 1st group of the Foreign Currency Classifier1 provided by the National Bank of Ukraine, should be obligatory sold (exchanged for UAH) through the authorized banks and financial institutions on the interbank currency market in the order provided by the National Bank of Ukraine. The norm was adopted in 1998 as an anti-crisis step, but was effective up to 2005.

The Decree on currency selling also provided the list of cases when 50 % of the cash receipts in foreign currency should not be obligatory sold, among which are such receipts as the funds obtained as the loans from the banks and financial institutions of Ukraine and from non-residents (in case of proper registration of the loans) and the funds designated for repayment of such loans (including interests), amounts transferred to Ukraine with the purposes of executing investments and amounts designated for return of investments, funds purchased on interbank currency market of Ukraine for the purposes of settlements with non-residents within the terms provided by legislation of Ukraine, amounts transferred to non-residents under foreign economic contracts and returned because of breach of obligations (if the funds were not purchased on interbank currency market of Ukraine), amounts provided to the residents being the agents (intermediaries) and designated for residents and non-residents, etc.

Formally the cancellation of the decree No 101 dd. 31.03.2005 causes Decree on currency selling to be effective again. Still we would pay your attention that this advice is preliminary one: we have not yet analysed the possibility of execution of the Decree on currency selling in present legal terrain. But we should mention that on the 10th of December 2010 the President of Ukraine issued Decree No 1119/2010 “On the decision of the National Security and Defence Council dd. 17/11/2010 “On challenges and threats to the national safety of Ukraine in 2011”” providing to implement the mentioned decision of the National Security and Defence Council, according to par. 2 of which the Cabinet of Ministers of Ukraine together with the National Bank of Ukraine were instructed to prepare and introduce for consideration of the Parliament of Ukraine the draft law providing the National Bank of Ukraine with the right to approve obligatory selling of part of foreign income of subjects of foreign economical activity as a temporary measure. So, the Decree may be the provisional measure taken before the mentioned draft law is elaborated.

According to par. 5 of the Decree, it should come in force 10 days after its registration by the Ministry of Justice. The ministry of Justice registered the Decree on the 13th of December 2010 (reg. No 1249/18544).   

 

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1.The text of the Classifier may be found at the official site of the Parliament of Ukraine: http://zakon.rada.gov.ua/cgi-bin/laws/main.cgi?nreg=v0521500-98