Penalty on the balance of unfinished foreign trade transactions

Will a penalty be charged for violation of the established deadlines for settlements for an "insignificant amount" of an incomplete transaction for the export and/or import of goods if the total amount of the transaction was subject to currency control?

The legal framework for currency transactions, currency regulation and currency supervision, rights and obligations of currency transactions entities and authorized institutions, and liability for violation of currency laws are set forth in the Law of Ukraine No. 2473-VIII "On Currency and Currency Transactions" dated June 21, 2018 (Law No. 2473).

Part one of Article 13 of Law No. 2473 stipulates that the NBU has the right to establish

- deadlines for settlements for export and import of goods;

- exceptions and (or) peculiarities of the implementation of this measure of protection for certain goods and (or) sectors of the economy upon submission of the Cabinet of Ministers of Ukraine

- minimum threshold amounts of export and import transactions subject to the deadlines for settlement of export and import transactions established in accordance with this Law.

In accordance with parts two and three of Article 13 of Law No. 2473, if the NBU sets a deadline for settlements under transactions of residents

- exports of goods, the funds are to be credited to the accounts of residents in Ukrainian banks within the terms specified in the agreements, but not later than the term and in the amount established by the NBU. The debt repayment period is calculated from the date of customs clearance of the exported goods;

- for imports of goods, their delivery must be made within the terms specified in the contracts, but not later than the deadline for settlements set by the National Bank of Ukraine from the date of advance payment (prepayment).

Pursuant to the Law of Ukraine No. 679-XIV "On the National Bank of Ukraine" dated May 20, 1999, the NBU establishes rules for banking operations, carries out currency regulation and currency supervision in accordance with the powers defined by special legislation, determines the procedure for conducting foreign currency transactions, issues regulations on conducting foreign currency transactions; introduces protection measures in accordance with the Law of Ukraine "On Currency and Currency Transactions".

Paragraph 21 of Section II of the Regulation on Protection Measures and Procedures for Certain Foreign Currency Transactions, approved by Resolution of the NBU Board dated January 2, 2019 No. 5 (hereinafter - Regulation No. 5), establishes that the deadlines for settlements under export and import transactions are 365 calendar days.

The deadlines for settlements specified in clause 21 of Sec. II of Regulation No. 5 do not apply to the export and import of goods (including incomplete settlements under the transaction), the amount of which (in the equivalent at the official exchange rate of the hryvnia to foreign currencies set by the NBU on the date of the transaction) is less than the amount provided for in Art. 20 of the Law of Ukraine "On Prevention and Counteraction to Legalization (Laundering) of Proceeds of Crime, Terrorist Financing and Financing of Proliferation of Weapons of Mass Destruction", except for splitting of export transactions or splitting of foreign exchange transactions (subparagraph 1 of paragraph 2 of Regulation No. 5).

As of today, the deadlines for settlements for export and import of goods, in accordance with clause¹⁴² of Resolution of the NBU Board No. 18 dated February 24, 2022 "On the operation of the banking system during the period of martial law" (hereinafter - Resolution No. 18), are 180 calendar days and apply to transactions carried out from April 5, 2022.

It should be noted that clause¹⁴³ of Resolution No. 18 stipulates that the deadlines for settlements specified in clause 14 of para. 2 of Resolution No. 18 do not apply to the transaction of export, import of goods (including incomplete settlements under the transaction), the amount of which (in equivalent at the official exchange rate of hryvnia to foreign currencies set by the National Bank of Ukraine on the date of the transaction) is less than the amount provided for in Art. 20 of the Law of Ukraine dated December 06, 2019 No. 361-IX "On Prevention and Counteraction to Legalization (Laundering) of the Proceeds of Crime, Terrorist Financing and Financing of the Proliferation of Weapons of Mass Destruction" (hereinafter - the "insignificant amount"), except for the splitting of export transactions or the splitting of foreign exchange transactions.

In accordance with part one of Article 20 of the Law of Ukraine No. 361-IX dated December 06, 2019 "On Prevention and Counteraction to Legalization (Laundering) of Proceeds of Crime, Terrorist Financing and Financing of the Proliferation of Weapons of Mass Destruction", financial transactions are threshold transactions if the amount of each transaction is equal to or exceeds UAH 400 thousand. (for business entities conducting lotteries and/or gambling - UAH 55 thousand) or equals or exceeds the amount in foreign currency, precious metals, other assets equivalent to UAH 400 thousand at the official exchange rate of UAH to foreign currencies and precious metals at the time of the financial transaction (for business entities conducting lotteries and/or gambling - UAH 55 thousand).

Please note that until 28.04.2020, in accordance with part one of Article 15 of the Law of Ukraine No. 1702-VII dated October 14, 2014 "On Prevention and Counteraction to Legalization (Laundering) of Proceeds of Crime, Terrorist Financing and Financing of Proliferation of Weapons of Mass Destruction", a small amount of a currency transaction is the amount of a currency transaction that is less than UAH 150000.

Violation by residents of the deadline for settlements established in accordance with part five of Article 13 of Law No. 2473 entails the accrual of a penalty for each day of delay in the amount of 0.3% of the amount of unpaid funds under the contract (the value of the undelivered goods).

The total amount of the accrued penalty may not exceed the amount of the unpaid funds under the contract (the value of the undelivered goods).

Based on the results of the audit, the central executive body that implements the state tax policy shall collect the penalty provided for in part five of this article from residents in accordance with the procedure established by law (part eight of Article 13 of Law No. 2473).

Please note that the NBU's regulations do not regulate the accrual and suspension of penalties for violation of payment deadlines.

The provisions of Law No. 2473 define the grounds for accrual of penalties, as well as the grounds for suspension and resumption of penalties for violation of the deadlines for settlements.

In particular, part six of Article 13 of Law No. 2473 stipulates that if the performance of an agreement provided for in parts two or three of this article is suspended due to force majeure, the payment term established in accordance with part one of this article and the accrual of penalties in accordance with part five of this article shall be suspended for the entire period of force majeure and resumed from the day following the day on which such circumstances expire.

Confirmation of the occurrence and termination of force majeure is a certificate of the authorized organization (body) of the country of location of the party to the foreign economic agreement (contract) or a third country in accordance with the terms of this agreement (contract).

In addition, part seven of Article 13 of Law No. 2473 stipulates that in case a court or international commercial arbitration accepts for consideration a resident's claim for recovery from a non-resident of a debt arising from the non-resident's failure to comply with the deadline provided for in a foreign economic agreement (contract), or an authorized body of the relevant country accepts for consideration a document on recovery of such debt from a non-resident debtor in favor of a resident in an out-of-court (pre-trial) enforcement procedure, the term established in accordance with the

In case of a court or international commercial arbitration decision to dismiss a claim in whole or in part as to property claims or to refuse to initiate proceedings or to leave a claim without consideration, as well as in case of recognition of a document on debt collection from a non-resident debtor as unenforceable, invalid, illegal, etc. and (or) closure (termination) of proceedings without crediting funds to residents' accounts in Ukrainian banks under such a document, the term established in accordance with this Article shall be renewed.

If a court or international commercial arbitration tribunal decides to satisfy the claim, only the penalty accrued before the date of acceptance of the claim for consideration by the court or international commercial arbitration shall be paid.

Thus, if, as of the date of expiration of the deadline for settlement of a transaction subject to currency control, the amount of the outstanding transaction is "insignificant", i.e. less than UAH 400 thousand, no penalty for violation of the deadline for settlement is accrued.

At the same time, if the deadline for settlements under a transaction subject to currency supervision has expired and the amount of the uncompleted transaction was equal to or exceeded UAH 400 thousand, the penalty for violation of the deadline for settlements is charged up to the amount of the amount of unreceived funds under the contract (the cost of undelivered goods).The grounds for suspending the accrual of penalties for violation of the deadline for settlements are set out in parts six and seven of Article 13 of Law No. 2473.