Taking into account the current limitations of the National Bank of Ukraine, foreign investors may receive dividends in foreign currency until 2016 inclusive. Dividends in foreign currency for 2017 are forbidden to be transferred to a foreign investor abroad. The ways to resolve this issue are in the following.
Investment account
Since dividends in foreign currency for 2017 are forbidden to be paid and transferred abroad, the only optimal option is to transfer such dividends to a non-resident investment account, opened in the authorized bank of Ukraine.
Investment accounts are opened to non-resident investors in authorized banks of Ukraine for conducting investment activities in Ukraine, as well as for the return of foreign investments and profits, revenues, and other funds received by a foreign investor from investment activities in Ukraine (para. 1.8 of Ch.1 of Guidelines on the opening procedure, use and closing of accounts in national and foreign currencies, approved by the resolution of the NBU Board dated 12.11.2003, No. 492; hereinafter – Guidelines No. 492). The procedure for opening an investment account and the use of funds under this account is governed by Ch. 16 of Guidelines No. 492. Initially, an investment transaction is carried out via an investment account in Ukraine, and then it is possible to expect revenues in the form of income.
Therefore, the possibility of transferring dividends to the investment account of a non-resident arises only if the non-resident has invested his/her share in the authorized capital through the transfer of funds to this investment account. If the investment was made in a different way, and not through an investment account opened in a Ukrainian bank, it is no longer possible to open it now, as to receive income in the form of dividends without making an appropriate investment, the investment account is not opened.
Escrow account
In addition to investment accounts, starting from 21.12.2017, the National Bank introduced the possibility of opening of conditional storage accounts (escrow) in national and foreign currencies by legal entities non-residents (investors) in Ukrainian banks (para. 1.13 of Guidelines No. 492). The principle of using an escrow account is as follows: the funds received on the escrow account are blocked by the bank until the obligations for which these funds are received are not fulfilled.
Exclusively the following transactions are executed by the account of conditional storage (escrow):
1) from entering into the bank the funds received from the account holder or from third parties which, upon the onset of the contract of the conditional storage account (escrow) basis, are transferred or issued in cash to the beneficiary (in cases stipulated by the legislation of Ukraine), or returned to the account holder;
2) related to the collection of property rights for funds held in the conditional storage account (escrow) or to the rights of the account holder or beneficiary to the bank (in cases established by Art. 10766 of the Civil Code of Ukraine);
3) from payment of remuneration of the bank for services related to servicing the conditional storage account (escrow) and performing transactions for it.
The mechanism of escrow calculations is widely used by developed countries as a guarantee of payment and performance of obligations under contracts of sale of shares of companies in real estate transactions. Financial experts believe that this innovation will be useful for investment treaties and equity transactions. However, banks are studying the potential demand for this product, and therefore are not yet ready to respond affirmatively when it will work possible. And it is unlikely that these accounts will be useful for the transfer of foreign exchange dividends.
Cash payments
Another option is the ability to pay dividends to a non-resident through the company’s cash desk.
It should be immediately noted, that the Rules for the use of cash foreign currency in the territory of Ukraine approved by the Resolution of the NBU Board dated 30.05.2007, No. 200 do not provide for the possibility of paying non-residents dividends in foreign currency through the cashier of the resident company. According to these rules, residents − legal entities can use cash foreign currency from their current accounts to cover expenses for:
- business trips of workers abroad;
- operation and servicing of own (leased, chartered) vehicles abroad;
- payment for labor, payment of premium and prizes for foreign workers –non-residents working in Ukraine under the contract.
At the same time, para. 2.2 of Ch. 2 of the Regulations on the conduct of cash transactions in the national currency in Ukraine, approved by the decision of the NBU Board dated December 15, 2004, No. 637, do not prohibit the payment of cash in national currency with individuals – foreigners, who are not engaged in entrepreneurial activity, through the cash desk of the company.
Therefore, only a founder − non-resident, who is an individual and does not conduct entrepreneurial activity, can receive dividends in cash from the company’s cash register in hryvnias. And this issue is also not so simple. Payment of dividends in cash within one day to an individual is limited to 50 thousand UAH. In the case of making cash settlements in excess of the established limit, the officials of the legal entity are brought to the administrative responsibility in accordance with Art. 16315 of the Code of Ukraine on Administrative Violations in the form of a fine of 100 to 200 tax-free minimum incomes of citizens (hereinafter − TFMIS) (from UAH 1 700 to 3 400), and in case of repeated violation − from 500 to 1 000 TFMIS (from UAH 8 500 to 17 000).
