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THE CONSEQUENCES OF CURRENCY LIBERALIZATION. NATALIA RADCHENKO

Наталья Радченко_портретThe new Law “On Currency and Currency Exchange Operations” has permitted us everything. So what does it mean? It provides for that from the moment when the law enters into force, we have some rights.

We are entitled, for the first time in 25 years, to freely dispose of our foreign currency savings: to open an account in a foreign bank without a license, to transfer there our own savings, accumulated due to our back-breaking toil, to buy shares in Google and Facebook and pay for education abroad. The National Bank has quoted the Constitution stipulating that from now on you may buy “everything that is not forbidden by law” with foreign currency, and has made us happy by so-called “currency visa-free”.

However, I’m troubled by some doubt provoked by my healthy legal paranoia.

Doubt 1. The boundaries of our freedom

The law makes it quite clear that:

  • Citizens are required to provide banks and monetary authorities a comprehensive information about foreign currency operations and their documentary confirmation.
  • Monetary authorities are the National Bank and the State Fiscal Service. They are entitled to conduct relevant monitoring. An important provision of the Law is that the SFS is entitled to obtain relevant information from banks during control of currency exchange operations. And the banks will be obliged to provide it. How this rule will be used by tax authorities? It is difficult to predict so far. But Pandora’s box has been opened.

Doubt 2. Tax returns and personal tax histories

Frankly speaking, last 25 years it has not been trendy in Ukraine to pay taxes. What has it led to? It resulted in the fact that many wealthy individuals have no proper tax history. And you can go on living this way until the bank asks you to justify the legality of your money’s origin, with which you decide to buy an apartment in Europe, taking advantage of new monetary freedom.

A number of banks are already clamouring for confirmation of funds origin, transferred through the Bank, if their amount exceeds 150 thousand UAH. And it’s getting trendy. You may, of course, hide behind the loan agreements or 10 years old real estate purchase and sale agreements. However, proper Declaration on the property status and income is an indisputable game changer in all Bank and SFS inquiries. The most important thing is to properly lay out its content, otherwise the tax burden will shock you.

Personal tax history as a part of monetary freedom is the tool that will allow you to take full advantage of the “currency visa-free”. Remember that foreign banks are also entitled to ask you about the origin of funds transferred to them from Ukraine.

In terms of the upcoming exchange of financial account information on Ukrainians in foreign banks (Common Reporting Standard), which should start in Ukraine in 2020, those people have to consider the revision of their foreign assets, who have transferred money on their personal accounts in foreign banks with violations of currency legislation, for example, without obtaining a proper license or who have bought a property without appropriate permissions. The Law “On Currency and Currency Exchange Operations” is not an indulgence. It is not an excuse for past monetary “sins”.

Doubt 3. Freedom for import-export and credit operations

The Law stipulates that for the regulation of payments on currency transactions, the NBU shall adopt a separate regulatory document. Only after we read it, we may forget at once about 180 days rule, may not register loan agreements with the NBU and be free to dance on the bones of electronic licenses. You should not relax, until all the normative regulations of the NBU are published.