Chapter

UKRAINE

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2000
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Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: September 24, 1996.
Exchange Arrangement
CurrencyThe currency of Ukraine is the Ukrainian hryvnia.
Exchange rate structureUnitary.
Classification
Managed floating with no pre-announced path for the exchange rateThe interbank foreign exchange market was reopened on March 19, 1999. The proceeds from the surrender of foreign exchange may be sold either in the official currency exchange (birzha) or the interbank market. The official exchange rate is determined daily as the average weighted exchange rate used by commercial banks in the interbank market.



On August 6, 1999, the authorities effectively abandoned the exchange rate band, which, on February 9, 1999, had been widened to Hrv 3.4–4.6 from Hrv 2.5–3.5 per $1. However, no formal announcement has yet been made regarding the elimination of the exchange rate band. The National Bank of Ukraine (NBU) continues to influence the exchange rate through interventions in the interbank market. The exchange rate arrangement was reclassified to the category managed floating with no preannounced path for the exchange rate from the category pegged exchange rate within horizontal bands.



On February 21, 2000, the NBU began to set the exchange rate of the hryvnia as the weighted average exchange rate of transactions by authorized banks in the interbank exchange market.
Exchange taxA tax of 1% is levied on cash transactions at foreign exchange bureaus.
Exchange subsidyNo.
Forward exchange marketNo.
Arrangements for Payments and Receipts
Prescription of currency requirementsPayments to and receipts from all countries are settled in foreign currencies. Nonbarter trade with the Baltics, Russia, and other countries of the FSU is now settled mainly in convertible currencies, especially the dollar. Settlement may also be in national currencies.
Payment arrangements
Bilateral payment arrangements
InoperativeThere are arrangements with the Baltics, Russia, and other countries of the FSU.
Regional arrangementsYes.
Barter agreements and open accountsBarter continues to be a major form of trade for Ukrainian companies in their transactions with the Baltics, Russia, and the other countries of the FSU. The use of barter in foreign trade transactions is prohibited for a group of goods determined by the Ukrainian Cabinet of Ministers.
Administration of controlThe NBU, the State Tax Administration, the State Customs Service, and the Ministry of Foreign Economic Relations and Trade (merged with the MOF) administer exchange controls.
International security restrictions
In accordance with UN sanctionsRestrictions on payments and on the provision of financial services to Iraq, the Taliban (the Islamic State of Afghanistan), and the UNITA movement in Angola are maintained.
Payment arrearsn.a.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeResidents are required to obtain a license from the MOF to deal in precious stones and metals. The NBU licenses commercial bank transactions in precious metals for monetary use.
Controls on external tradePermission for residents to export precious metals and precious stones is granted by the Ministry of Economy in consultation with the MOF. Individual licenses to export precious metals for monetary use are issued by the NBU.
Controls on exports and imports of banknotes
On exports
Domestic currencyResidents may export up to the equivalent of 10 times the nontaxed minimum wage (HRV 17), while the limit for nonresidents is five times the nontaxed minimum wage. Juridical persons require a license from the NBU.
Foreign currencyResident natural persons may export the amount declared to the customs service at the time of entry and/or $1,000 in cash or traveler’s checks without documentation, and up to the equivalent of $4,000 in cash or traveler’s checks with permission from an authorized bank. Nonresident natural persons may export the amount declared to the customs service at the time of entry and/or $1,000 in cash without permission, and $1,000 in cash and $5,000 in traveler’s checks with permission. The exportation of currency by residents and nonresidents in excess of the established norms requires a permit from the NBU.
On imports
Domestic currencyResident and nonresident natural persons are permitted to import domestic currency up to the amounts declared in a customs declaration upon exit from Ukraine. Juridical persons must obtain a permit from the NBU to import domestic currency.
Foreign currencyResident and nonresident natural persons are permitted to import up to the equivalent of $50,000 in cash; for amounts in excess of this limit, permission from the NBU is required. Residents and nonresidents require a permit issued by the NBU to import foreign currency in amounts in excess of these limits.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyCertain conditions apply to these accounts.
Held abroadA license from the NBU is required, except when the account is opened during a temporary stay abroad.
Accounts in domestic currency convertible into foreign currencyThese accounts are convertible in cases where an obligation to a nonresident exists.
Nonresident Accounts
Foreign exchange accounts permittedResident juridical persons of Armenia, Belarus, Kazakhstan, Lithuania, Moldova, Russia, and Uzbekistan must have a license from their respective central banks in order to open accounts with authorized Ukrainian banks. Natural persons of Belarus, Kazakhstan, and Russia do not require such a license in order to open accounts during a temporary stay in Ukraine.
Domestic currency accounts“P” accounts may be opened for the permanent representative office of a foreign company, firm, or international organization established without the status of a legal entity, through which a nonresident conducts all or part of his or her entrepreneurial activities in Ukraine. P accounts may be credited with the proceeds from current international transactions from any economic activity in Ukraine.



“N” accounts may be opened by a representative office of a nonresident legal entity, an institution, or a person who represents its interests in Ukraine and does not engage in entrepreneurial activities in the territory of Ukraine. The holders of N accounts are regarded as nonresidents for exchange control purposes, although they are treated as residents for tax purposes. N accounts may be credited with funds by selling foreign exchange to the servicing bank in order to effect settlement associated solely with the maintenance of the representative office, or with funds received by embassies and consulates for providing consular services. All N account holders may purchase foreign exchange on the interbank currency market to transfer funds abroad, including interest accrued on the balance in the account.
Convertible into foreign currencyP account holders may (1) convert and transfer to a nonresident legal person (which it represents) the proceeds from transactions effected in Ukraine for the sale of goods and work services, interest accrued on deposit accounts and balances in such a type P account, and the balance in an account when ceasing activities in Ukraine; and (2) credit to their own account in foreign currency resources designated for labor compensation of nonresident employees and for business trip and representative office expenses abroad. N account holders other than foreign diplomatic, consular, commercial, and other official missions and their offices may not purchase foreign exchange on the interbank market to transfer funds abroad from their N account. Nonresident natural persons may convert and transfer abroad funds from settlement accounts in hryvnias. Approval to convert these accounts into foreign currency is required.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Advance payment requirementsThe restriction on advance import payments was eliminated on July 1, 1999.
Documentation requirements for release of foreign exchange for importsIn order to purchase foreign exchange on the interbank market in group 1 of the foreign exchange nomenclature of the NBU and transfer it abroad to pay for imports, residents must provide the bank with copies of the pertinent import contracts. In addition, a resident needs to obtain a certificate from the State Tax Administration (STA) confirming information on the resident’s bank account and registration as a legal entity. A certificate from the STA is also required to transfer any foreign exchange to accounts of nonresidents registered in offshore zones.
Domiciliation requirementsYes.
Preshipment inspectionInspection is not mandatory but may be performed by the Ukrainian Chamber of Commerce and Industry at the request of nonresidents.
Letters of creditYes.
Import licenses and other nontariff measures
Negative listYes.
Other nontariff measuresNontariff measures are limited to those for national safety and environmental reasons.
Import taxes and/or tariffsThere are three customs duty rates with a trade-weighted average rate of about 5% (including energy imports). The first category (preferred duty rate) applies to goods from countries with which Ukraine has a free trade agreement, imports from developing countries, and imports from countries that have a preferential agreement with Ukraine. The second category (concessional duty rate) applies to imports from countries that have entered into MFN agreements with Ukraine. The third category applies to imports from other sources. A uniform, nondiscriminatory 2% import surcharge was in effect between July 1, 1999, and December 31, 1999.



A VAT of 20% is levied on most imports.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsExporters must repatriate all foreign exchange proceeds through domestic commercial banks within 90 days of shipment.
Surrender requirementsThere is a 50% surrender requirement and proceeds are required to be channeled through the interbank foreign exchange market.
Financing requirementsn.a.
Documentation requirements
Preshipment inspectionInspection is not mandatory but may be performed by the Ukrainian Chamber of Commerce and Industry at the request of residents.
Export licenses
With quotasGoods subject to voluntary export restraints or other international agreements and those falling under the “special export regime”—coal, precious metal scrap, and alcoholic spirits—are also subject to export quotas and licenses. The licenses required for these goods are, however, freely provided, except in the case of precious metal scrap. For grain exports, it is required that sales for the export market be undertaken through the agricultural commodity exchange. Export contract preregistration is limited to goods subject to voluntary export restraints or antidumping actions. Registration of exports is automatic and for statistical purposes only.
Export taxesTaxes are applied to exports of livestock, skins, and hides. Effective September 30, 1999, this tax was extended to exports of sunflower seeds.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersA nonresident requires a certificate from the STA stating that there are no outstanding tax liabilities associated with the underlying transaction.
Investment-related paymentsInformation is not available on the payment of amortization of loans or depreciation of direct investments. Proceeds, including interest, from investment in treasury bills held by nonresidents that were not rescheduled were blocked in 1998. On August 31,1999, this restriction was lifted.
Payments for travel
Quantitative limitsThe foreign currency limit for tourists is $10,000, including $5,000 in cash and $5,000 in traveler’s checks a trip; for business travel, the limit is $10,000 (cash and/or traveler’s checks). In addition, credit cards for international payment systems issued by Ukrainian banks may be used abroad.
Indicative limits/bona fide testYes.
Personal paymentsPension payments are made in accordance with agreements concluded between the Pension Fund of Ukraine and the corresponding organizations of other countries. Transfers of personal funds of natural persons (alimony, pensions, and funds for family maintenance) are performed in accordance with existing regulations.
Quantitative limitsTransfers in excess of the standard amounts require an NBU license.
Indicative limits/bona fide testYes.
Credit card use abroadResidents may use abroad credit cards issued by Ukrainian banks.
Other payments
Prior approvalYes.
Quantitative limitsThe limit is $20 for membership dues.
Indicative limits/bona fide testYes.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsProceeds, except those of a few organizations with international operations, such as the national airlines, are subject to repatriation requirements.
Restrictions on use of fundsYes.
Capital Transactions
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
Bonds or other debt securities
Sale or issue locally by nonresidentsRepayment of investments in treasury bills that were not rescheduled was blocked until August 31, 1999.
Purchase abroad by residentsAn NBU license is required.
Sale or issue abroad by residentsYes.
On money market instruments
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
On collective investment securitiesAn NBU license is required.
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
Controls on derivatives and other instrumentsThere are controls on all transactions in derivatives and other instruments.
Controls on credit operations
Commercial credits
By residents to nonresidentsAn NBU license is required if the repayment deadline exceeds 90 days.
Financial creditsAll financial credits must be registered with the NBU.
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsCommercial banks require a license from the NBU.
To residents from nonresidentsYes.
Controls on direct investment
Outward direct investmentInvestments require an individual NBU license.
Inward direct investmentForeign investments in most types of businesses are permitted, although licenses are required in some cases. Investments in insurance and businesses engaged in intermediation activities require a license from the MOF, and investments in the banking sector require a license from the NBU. Foreign investment in Ukraine must be made in convertible currency or in kind. The Russian ruble is not regarded as a convertible currency for this purpose.
Controls on liquidation of direct investmentThe transfer of proceeds, after payment of taxes due, is guaranteed.
Controls on real estate transactions
Purchase abroad by residentsAn NBU license is required.
Purchase locally by nonresidentsYes.
Sale locally by nonresidentsYes.
Controls on personal capital movements
Loans
By residents to nonresidentsAn NBU license is required.
To residents from nonresidentsNatural persons are not allowed to receive loans in foreign currency.
Gifts, endowments, inheritances, and legacies
By residents to nonresidentsThere are no controls with regard to natural persons.
To residents from nonresidentsThere are no controls with regard to legal persons.
Transfer of assets
Transfer abroad by emigrantsTransfers by nonresident natural persons are not restricted after settlement of tax liabilities.
Transfer into the country by immigrantsTransfers by nonresident natural persons are unrestricted.
Provisions specific to commercial banks and other credit institutions
Borrowing abroadBorrowing exceeding one year requires registration with the NBU.
Maintenance of accounts abroadYes.
Lending to nonresidents (financial or commercial credits)An NBU license is required.
Lending locally in foreign exchangeThis type of lending may be done only for financing a limited range of “critical imports.” The provision of foreign exchange to service private sector loans contracted by residents may not be made at an interest rate higher than 20%. Effective March 16, 1999, the restrictions on granting credits in foreign exchange locally were eliminated.
Purchase of locally issued securities denominated in foreign exchangeYes.
Investment regulations
Abroad by banksAn NBU license is required.
In banks by nonresidentsYes.
Open foreign exchange position limitsOpen foreign exchange positions are set according to standards established by the NBU.
On resident assets and liabilitiesYes.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investorsNo.
Other controls imposed by securities lawsn.a.
Changes During 1999
Exchange arrangementFebruary 9. The exchange rate band was widened.



March 19. The interbank foreign exchange market was reopened.



August 6. The band was effectively abandoned to give way to a policy of managed floating. The exchange arrangement was reclassified to the category managed floating with no prearranged path for the exchange rate from the category pegged exchange rate within horizontal bands.
Imports and import paymentsJuly 1. A uniform, nondiscriminatory import surcharge of 2% was introduced.



July 1. The restriction on advance import payments was eliminated.
Exports and export proceedsSeptember 30. An export duty on sunflower seeds was introduced.
Payments for invisible transactions and current transfersAugust 31. The restriction on transferring proceeds from treasury bonds held by nonresidents was eliminated.
Capital transactions
Provisions specific to commercial banks and other credit institutionsMarch 16. The restrictions on granting credits in foreign exchange locally were eliminated.
Changes During 2000
Exchange arrangementFebruary 21. The NBU began to set the exchange rate of the hryvnia as the weighted average exchange rate of transactions by authorized banks in the interbank exchange market.
Imports and import paymentsJanuary 1. The uniform, nondiscriminatory 2% import surcharge was eliminated.

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