Олег Паракуда: що виграє населення і бізнес від валютної лібералізації

On February 7, the new law “On currency and currency transactions” comes into force, which replaced the Decree on currency regulation.

Oleg V. Parakuda, a partner at SLS Group Law Firm,  provided a detailed comment to 112.ua, describing how currency liberalization  will affect  the population and business, and outlining the “positives” and “negatives” of the proposed rules.

1. How, in your opinion, such conditions of currency liberalization  will affect  the population and business?

– In general, it is positive, but they should not be idealized. After all, the easing of protection measures, which will take effect on February 7, 2019, is far from complete liberalization. Yes, we will still have, albeit temporarily, fundamental restrictions on business, including restrictions on the repatriation of dividends in foreign currency, the sale of corporate rights and  unlisted  securities, lending in national currency to non-residents, buying foreign currency  through  credit resources and others . Ukrainian business expects that due to the improvement of macro-financial indicators, these restrictions will be lifted in the near future and a full-fledged regime of free movement of capital will be introduced.
For Ukrainian citizens, the changes will be no less significant: they will finally be able to invest abroad without obtaining individual licenses and undergoing excessively complicated bureaucratic procedures. With the entry into force of the law, individual licenses will be replaced by a system of electronic limits set at 2 million euros per year for legal entities and 50 thousand euros per year for individuals. To make an investment using the e-limits system, you will only need to submit the necessary documents to the bank and go through internal control procedures. The new law effectively deprived the National Bank of Ukraine of the functions of licensing foreign investment activities within the established limits.
In addition, the mechanism of remittances abroad without opening accounts is simplified for Ukrainian citizens. In particular, in February the limit for such operations will be increased 10 times: from 15 thousand to 150 thousand hryvnias per year. This is due to the fact that about 40% of foreign exchange transactions take place within the above limits. At the same time, they occupy only 2-3% of the volume of foreign exchange transactions. The abolition of unjustified restrictions on individuals is an obvious step towards the liberalization of Ukraine’s foreign exchange market.

2. What “positives” and “negatives” can you note in the proposed rules?

– The key achievement of the changes taking place in the field of currency regulation is the transition from declarations to real steps. It will be recalled that currency restrictions were introduced in 2014 and  they were positioned  as temporary measures aimed at overcoming the crisis in the foreign exchange market. Given that the economic situation stabilized in 2016-2018, foreign exchange reserves were restored at the level of early 2014, and payments and restructuring on external borrowing were successful, Ukrainian business and foreign investors hoped to ease existing restrictions, which many say real sector of the economy began not so much to protect the Ukrainian economy as to restrain its development.
In addition, the liberalization measures introduced will make it easier for domestic exporters and importers to breathe. Despite the fact that the requirement for the mandatory sale of foreign exchange earnings in favor of legal entities in the amount of 50% remains, the type of sanction for violation of payment deadlines for foreign economic activity, such as termination of the right to conduct foreign economic activity deadlines for such calculations will be doubled, from 180 to 365 days.
Let me draw your attention to the fact that the measures taken by the National Bank of Ukraine to liberalize the regulation of the foreign exchange market do not mean the  abolition of  foreign exchange supervision. Future changes in the foreign exchange market can be  described, as the transition from the concept of “allowed only what is expressly provided by law” to the concept of “allowed everything that is not prohibited by law.

The full text of the article can be found at the link. 

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