Foreign trade settlements without bank participation: what is the liability?

What liability is provided for settlements between residents and non-residents within the framework of trade transactions without the participation of a bank?

In accordance with paras. 28, 31 of Section IV of the Regulation on Transactions with Currency Valuables, approved by Resolution of the NBU Board No. 2 dated January 2, 2019, settlements between residents and non-residents under current trading transactions are carried out exclusively through banks, except as provided for in part four of Article 59 of the Law of Ukraine No. 3480-IV "On Capital Markets and Organized Commodity Markets" dated February 23, 2006.

Clause 16 of the Regulation on Measures of Protection and Determination of the Procedure for Certain Transactions in Foreign Currency, approved by Resolution of the NBU Board No. 5 dated January 2, 2019 (hereinafter - Regulation No. 5), stipulates that settlements under foreign economic transactions shall be made exclusively through bank accounts.

According to part 1 of Article 14 of the Law of Ukraine dated June 21, 2018 No. 2473-VIII "On Currency and Currency Transactions" (the "Law No. 2473"), the following penalties may be imposed for violation of currency legislation (except for violation of the terms for export and import of goods, liability for which is established in accordance with Article 13 of the Law No. 2473)

• to legal entities (except for authorized institutions) - measures of influence in the form of fines;
• to individuals, officials of authorized institutions, officials of legal entities - measures of influence in the form of fines provided for by the Code of Ukraine on Administrative Offenses dated December 07, 1984 No. 8073-X (hereinafter - the Code of Ukraine on Administrative Offenses).

Pursuant to part 4 of Article 14 of Law No. 2473, the central executive body implementing the state tax policy has the right to impose a penalty on legal entities (except for authorized institutions) in the amount of up to 100% of the amount of the transaction conducted in violation of currency legislation.

Pursuant to Article ¹⁶²¹ of the Code of Administrative Offenses, violation of the procedure for conducting currency transactions entails a fine of 1000 to 3000 tax-free minimum incomes for officials of legal entities (except for authorized institutions) and citizens - business entities.

The procedure for the application by the tax authorities of measures of influence in the form of penalties to legal entities (except for authorized institutions) for violation of the requirements of currency legislation is approved by the Resolution of the Cabinet of Ministers of Ukraine No. 524 dated 26.05.2021 (hereinafter - Procedure No. 524).

Clause 4 of Procedure No. 524 stipulates that tax authorities apply to legal entities (except for authorized institutions) measures of influence in the form of penalties for each type of violation of the requirements of currency legislation established by Law No. 2473 or determined by the regulations of the National Bank adopted in accordance with Law No. 2473, in particular in Regulation No. 5, namely on the issues of settlements in the territory of Ukraine; settlements on foreign exchange transactions; trade in currency values and cross-border transfer of currency values; with

In case of violations referred to in clause 4 of Procedure No. 524, the tax authorities impose penalties in the amount of 25 percent of the amount of the transaction conducted in violation of currency legislation, converted into the national currency at the official NBU exchange rate set on the day of such transaction, for each case of violation established as a result of the audit.

The same actions committed repeatedly by a legal entity (other than authorized institutions) that was fined for such violation during the year shall result in a fine (penalty) of 50% of the amount of the transaction conducted in violation of the currency legislation, converted into national currency at the official NBU exchange rate on the day of such transaction, for each case of violation established as a result of the inspection.

In addition, violation of the procedure for conducting foreign exchange transactions entails a fine of one thousand to three thousand tax-free minimum incomes for officials of legal entities (except for authorized institutions) and citizens who are business entities.