Opening an account in a foreign bank by a Ukrainian business entity
We would like to inform you that we are receiving signals about difficulties with payments to Ukraine, since Ukraine belongs to the category of risk zones – war zones. At the same time, banks do not want to figure out whether the counterparty is located on the territory controlled or not controlled by Ukraine, whether the location of the counterparty is in the war zone and, in this regard, they often refuse payments.
We would like to draw your attention to the fact that the way out of the situation is the possibility provided for by the legislation of Ukraine: opening a foreign currency account in a foreign bank without opening a representative office by a resident of Ukraine, to which export foreign exchange earnings can be credited.
Such an opportunity is provided for by paragraph 1) of part 1 of article 2, part 3 of article 4 of the Law “On currency and currency transactions” dated 21.06.2018 for carrying out foreign currency transactions through accounts in foreign banks. No changes were made to this law in wartime in this part.
At the same time, the norms of the Tax Code and the Law “On Currency and Currency Transactions” do not provide for notification to the State Tax Service body about the opening of accounts in foreign banks by a legal entity – a resident of Ukraine.
However, as previously in paragraph 23 of the Regulation on protection measures and determining the procedure for carrying out certain transactions in foreign currency, approved by National Bank Resolution No. 5 dated 02.01.2019, and now in National Bank Resolution No. 18 dated 24.02.2022 “On the work of banking system during the introduction of martial law” there is a requirement that for operations of residents on the export of goods (services), funds must be credited to the accounts of non-residents in banks of Ukraine.
In its explanations (with reference to the establishment by the National Bank of a deadline for crediting foreign exchange earnings during export operations), the State Tax Service also insists that in the case of the receipt of export foreign exchange earnings to an account in a foreign bank within the deadline, it must be transferred to an account in Ukrainian bank1.
Despite the above-mentioned points, we believe that the option of opening an account in a foreign bank to credit it with export foreign currency earnings allows at least to preserve relations with non-resident counterparties and not transfer formal difficulties regarding payments to Ukraine onto their shoulders.
1 Letter of the State Tax Service dated January 21, 2022 No. 100/IPK/99-00-04-03-03-06: “…current legislation does not prohibit natural persons from opening accounts in financial institutions of other countries. At the same time, funds from the operations of business entities – residents, in particular, from the export of goods (services), are subject to being credited to the accounts of residents in Ukrainian banks.”
Explanation from the State Tax Service of Ukraine “ZIR” database: “Thus, a legal entity – a resident of Ukraine can open a bank account abroad to credit export foreign currency earnings. Since the National Bank has established a deadline for the crediting of foreign currency earnings during export operations, such funds must be deposited into an account in a Ukrainian bank within the specified period. Accordingly, if the export foreign currency proceeds have been deposited into an account opened in a foreign bank, it must be transferred to an account in a Ukrainian bank within the deadline.”