Cash settlements limitation from September 1st, 2013

The NBU board has resolved to limit cash settlements (for goods and services) between individuals and legal entities to UAH 150 000 per day starting from September 1st, 2013.

Settlements exceeding the aforementioned amount will be preformed exclusively in a non-cash form via crediting and/or transferring money to current accounts, as well as to public notary’s deposits and separate current accounts in the national currency. The number of enterprises (entrepreneurs) and individuals participating in settlements during a day will not be limited, as reported the Deputy Head of the National Bank of Ukraine Vira Rychakivska.

Experts say such restrictions will apply to big purchases only (such as cars, expensive motorcycles, yachts, airplanes, jewelry, and real estate).

How is a real estate deal going to be concluded now? A buyer and a seller will have to perform settlements in the national currency either using current bank accounts or payment cards. Public notary’s deposit is another option for them. All this can increase expenses under a deal by the amount of bank fees for transfer and withdrawal of funds, as well as by the cost of opening an account. If a buyer decides to convert proceeds to dollars, such an exchange will cause losses (Note that non-residents purchase foreign currency under special rules). Also, the buyer will likely be unable to withdraw money on the same day because of the restrictions imposed by financial institutions.

According to the NBU, “the main goal of introducing restrictions on cash settlements is to increase the volume of non-cash operations, as well as to raise additional resources for the economy financing. A higher number of non-cash settlements will increase the amount of financial resources coming into the banking system from the national economy participants, which will also improve liquidity of banks. Moreover, we expect the level of deposits dollarization to decrease and the number of non-cash settlements by individuals to grow,” – said the Deputy Head of the NBU Vira Rychakivska. Decrease in the cash flow will have a positive effect on the Ukrainian economy. We expect a further GDP growth (by 0.2%), improvement in the economy financing in the national currency, and decrease in cash volumes of foreign currency circulating beyond the banking system”.

Some other (obvious) goals of the coming “innovation” include a more efficient counteraction to tax evasion and positive influence on financial sector. As the Deputy Head of the NBU Vira Rycharivska said, “introduction of such restriction is expected to bring UAH 14-16 billion of liquidity into the financial sector within a year”.

Conclusion: Introduction of the restriction is a rather convenient way to replenish the state budget, increase profitability of banks and create more favourable conditions for crediting and supporting the country’s financial system.

Professional comments on some nuances to the amendment, by Sept, 19th.

1. Is it correct that the new legislation requires that UAH 150,000 threshold be applied to the amount specified in the agreement, rather than to the amount of a single payment? In other words, if I have a contract amounting to 150,000 and more, I can not break the amount into several parts and pay cash, can I?

It is true that the new law is applied to the amount specified in the agreement. One actually can split the payment, but the amount has to be paid in the non-cash form anyway. 

2. Having restricted cash payments the National Bank of Ukraine (NBU) decided not to limit the number of transactions per day within UAH 150,000 with different vendors. Thus, during one day it will be possible to pay for two or more purchases, each of them being less than 150 thousand UAH, if the sellers are different entities. Has there been no such restriction ever before?

Indeed, an individual client can pay to several counterparties under different contracts within one day. And no, there haven’t been any restrictions for individuals before.

3. If I have an account with a foreign bank in foreign currency, then what would my settlements in hryvnia be like? What additional fees and commissions should I prepare myself to?

Non-residents of Ukraine can send money from their personal accounts abroad to their accounts in the Ukrainian bank. Note that there is a restriction imposed by the NBU limiting currency transfers, i.e. the amount over UAH 150,000 should automatically be converted into hryvnia. All fees and commissions are totally depending on the tariffs of the sending and receiving banks.

4. Does this new law apply equally to both legal entities (e.g. entrepreneurs, sole proprietors) and individuals? 

It does apply to both, but differently. Sole proprietors will have to take into account the norms for individuals and economic entities at the same time.

5.  What is the standard package of documents required for opening an account for further payment transaction by a non-resident? 

a) application to open a current account;

b) signature card;

c) bank account agreement;

In fact, these three documents can be submitted as one. For instance, in UkrSibbank BNP Paribas Group a client has to fill out an Application Agreement containing all the required features of the standard application, signature card, and an account agreement.

d) passport or other ID;

e) document certifying residency (incl. temporary), if this information is not specified in a passport document (e.g., hotel certificate issued by the administration).

If a non-resident is about to top up his/her account with cash, he/she will also need to submit the original document indicating the origin of funds. In fact, it will be much easier for a foreigner to come to a specialized international branch of a reliable bank in Ukraine to get the necessary advice and high-quality service.

Striving to provide top-class services to people from throughout the world anywhere they need it, UkrSibbank BNP Paribas Group has opened its international branch in Kyiv specially for foreigners.

(Consultancy is provided by Кyiv Retail Center for International Clients of UkrSibbank, BNP Paribas Group)

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