Opening a corporate bank account in Ukraine
Legal entities, registered in Ukraine, most of their settlements have to do through corporate current bank accounts. Therefore, opening of corporate bank account is one of the primary task for a newly-registered company.
This article provides information on procedure of opening and operating a corporate current bank account of legal entities registered in Ukraine (including subsidiaries of foreign companies). Opening of investment bank accounts for foreign companies and accounts of permanent establishments are out of the scope of this article and will be covered in a separate article.
According to Ukrainian law, for legal entities, cash transfers are allowed in the following cases:
- legal entity may pay in cash to other legal entities or private entrepreneurs for not more than UAH 10,000 per day
- private individual may pay in cash to legal entity for goods and services in the amount not more than UAH 50,000 per day.
All other settlements by legal entities must be made through bank account transactions. Therefore, one of the primary tasks when you incorporate a new company is to open a bank account to ensure formation of share capital, settlements with counter-parties, paying taxes etc. For choosing the most suitable and safe bank for you, see our article choosing a bank in Ukraine.
The following types of bank accounts are possible for legal entities registered in Ukraine (including subsidiaries of foreign companies):
- Current corporate bank account (in national currency Hryvna (UAH) or foreign currency) – account, used by company for formation of share capital, settlements with counter parties, paying taxes, and all other income and expense transactions, etc.
- Deposit corporate bank account (in UAH or foreign currency); note that currently it is now possible to open a deposit bank accounts in Russian Ruble. Deposit account is used for depositing money by company for certain period, as prescribed by the deposit agreement with the bank, with accruing interests on deposit amount. Funds on the deposit account may be pledged for securing obligations of the deposit holder or obligations of third parties (under respective pledge agreement).
- Additionally, company’s divisions may open current bank accounts (in UAH and foreign currencies). Current account of company’s division is used for settlements of the division.
Note that before registration, legal entity may open special bank account for formation of share capital. However, as for most cases formation of share capital is allowed after registration of legal entity (exception is joint stock companies, who have to form share capital before JSC registration), company may receive contributions of shareholders after its registration on its current corporate bank account.
Each type of the above-mentioned accounts has its own purpose, rules of opening and operating. Ukrainian banking law contains strict imperative rules of operating bank accounts, therefore before planning business transactions, make sure that your account regime allows you the specific settlements.
This article provides overview of the procedure of opening and operating of current corporate bank account.
Required Documents & Procedure
In order to open a corporate bank account, you will need to file a number of documents, including:
- Application on account opening
- Documents confirming powers of representative of the company (the person whi is filing the documents), his/her passport and tax number
- Copy of the company’s statutory document (depending on type of legal entity: charter, articles of association etc). For limited liability companies that are acting on the basis of model charter, the statutory document is not filed because the bank can retreive the necessary information from the online company registry.
- 2 Signature cards (notarially certified)
- Copies of passports, tax numbers and documents confirming powers of persons, mentioned in the signature card
Additionally you will need to fill in and sign questionnaire (with information on the ultimate beneficial owner of the company), ownership structure of the company, other documents on request of the bank. All banks are required to conduct a Know-Your-Customer (KYC) check under financial monitoring rules although the specific KCY procedure varies from bank to bank. Therefore you should check with your bank if any additional documents are required under the bank’s internal procedures.
After all the documents have been filed, the bank will review them and give you the final decision on opening of bank account or not. In general, it takes anywhere from 1 day to 1 week to review the application and open the bank account. Therefore if timing is important, you should check with the specific bank you are interested in before submitting the account opening documents.
Within territory of Ukraine, all settlements can be done in the national currency Hryvna (UAH). The company’s UAH account, allows payments for all standard business transactions including clearings and settlements that are necessary for business activity of the legal entity and that do not contradict Ukrainian legislation. Company may receive and perform payments and settlements, pay taxes, salaries, bank’s fees and commissions etc.
Payments in foreign currency can be done only with prior obtainment of individual license of the National Bank of Ukraine. There are certain exceptions from this rule (when license is not needed), namely:
- settlements for goods, works or services, intellectual property rights and other property rights with non-residents. However individual license is still required for payment for currency assets or payments under life insurance agreements.
- payment of foreign investments profits (including dividends) overseas or interests under loan agreements
- return of foreign investments
- transfers by investor (or representative office of foreign investor) overseas to other investors under production share agreement
All other payments in foreign currency overseas and payments in foreign currency within territory of Ukraine are allowed only with prior obtainment of individual license of the National Bank of Ukraine. Additionally, Ukrainian legal entities need individual license of the NBU to invest overseas, to grant loans to foreign individuals or foreign legal entities, to deposit funds on accounts overseas. For more information on currency controls in Ukraine and possible transactions see our article Current capital control measures in Ukraine.
Note that at present it is temporary prohibited to purchase foreign currency and make transfers overseas for transactions, which require individual license of the NBU. Exceptions are:
- depositing funds by legal entities overseas on their accounts in foreign banks
- fulfillment by resident-guarantor ensured obligation under loan agreement with international financial organization or with participation of export-credit agency
- payment in foreign currency of participatory fees by legal entities-residents to legal entities-non-residents
- transactions of legal entities related to investment overseas providing that total amount of such transactions within one individual license within 1 calendar year does not exceed USD 2,000,000 equivalent
- other payments, made by legal entities under individual license NBU, providing that such transactions do not exceed USD 50,000 per month (or equivalent in other foreign currency)
Allowed receivables on foreign currency corporate bank account of legal entity, registered in Ukraine (hereinafter – the Company):
- purchased foreign currency at inter-bank currency market (note that Ukrainian law stipulates exclusive number of cases when Company is allowed to purchase foreign currency and all such grounds have to be supported by respective documents, evidencing obligations in foreign currency)
- exchanged foreign currency at inter-bank currency market
- funds transferred from own deposit or current account
- interests accrued on funds on own current account of the Company or own deposit on deposit accounts
- cash in cases, stipulated by law
- bank transfers from overseas, including:
- payments under foreign economic agreements
- repayments of loans under loan agreements with non-residents (where Company is a lender), providing such loan agreements are registered by the National Bank of Ukraine
- repayment of deposit amounts, allocated overseas
- funds returned from non-resident , who previously received this funds from the Company
- transfers from overseas for further transferring to third parties-subjects of business activity in Ukraine, who authorized the Company to perform sale of goods, works or services under agent agreements
- transfers from overseas from non-residents for conducting registration of IP rights in Ukraine (if Company’s activity allows to receive such payments)
- transfers from overseas for use of IP of residents
- loans from non-residents (providing such loan agreements are registered by the National Bank of Ukraine)
- foreign investments from overseas (in cases when shareholders of legal entity are non-residents they can pay their share in foreign currency)
Note that due to temporary the NBU measures, 50 % of receivables of Company from overseas will be sold to Hryvna at inter-bank currency market by the servicing bank. Among exception from these are rule are receivables as contribution to share capital of the Company (if shareholder is non-resident), charity and some others.
- foreign investments from investment account of non-resident in Ukraine (in cases when shareholders of legal entity are non-residents they can pay their share in foreign currency through investment account)
- transfers from agent-resident of Ukraine, who performed sale of goods, works or services under agent agreements on behalf of the Company
- transfers from permanent establishments, registered in Ukraine, in case such permanent establishments have previously received the funds from overseas for further payment to the Company
- transfers from legal entities non-residents or their representative offices in Ukraine under intergovernmental agreements or technical aid projects
- transfers from legal entities non-residents / their representative offices in Ukraine or foreign individuals as charity
- loans from banks-residents or other resident financial institutions
- transfers from account, opened for joint venture, which was previously created by Company and non-resident – in case of termination of the joint venture activity
- funds from bank, earlier placed on the terms of subordinated loan
- other transfers which do not contradict Ukrainian law
Allowed payments / withdrawals from foreign currency corporate bank account of the Company:
- transfers to own current or deposit account
- cash withdrawals in cases stipulated by law
- transfers within Ukraine to third persons subject to prior obtainment of individual lisence of the NBU
- transfers to non-resident under foreign economic agreement
- sale of foreign currency at inter-bank currency market
- exchange foreign currency at inter-bank currency market
- receivables from account of resident-agent, who performed under agent agreement sale of goods, works or services of such Company to non-resident
- transfers overseas to authorized companies-non-residents for registration of IP rights overseas
- transfers to non-residents for use of IP rights
- transfers of fees for education, training, participation in conferences and exhibitions (respective invoices must be filed to the bank)
- payment to individuals-residents who are on long-term business trip or training as salary, leave allowance or educational fellowship
- transfers overseas to notaries, advocates, arbitrary or trial fees (respective invoices must be filed to the bank)
- repayment of loans and interests to non-residents, providing such loan agreement was duly registeredby the National Bank of Ukraine
- investments overseas providing the resident has obtained individual licence of the National Bank of Ukraine
- transfers loans to non-residents providing the resident has obtained individual licence of the National Bank of Ukraine
- payment in foreign currency of participatory fees by the Company to legal entities-non-residents subject to prior obtainment of individual lisence of the NBU (such lisence is not required if such participatory fee does not exceed EUR 10,000 equivalent per year)
- other transactions which do not contradict Ukrainian law
Certain currency controls exist in Ukraine
Ukrainian banking legislation and foreign currency controls are one of the most rigid in the world. Payments to non-residents, settlements with counter-parties under foreign economic agreements, purchase of foreign currency require performing examination by servicing bank. Additionally, some transactions are temporary prohibited to due strict currency controls regime, implemented by the National Bank of Ukraine since end of 2013 to control out-flow of foreign currency from Ukraine and stabilize national currency Hryvna including:
- obligatory sale of 50 % of receivables of the company in foreign currency from overseas (with certain exceptions)
- prohibition of pre-term repayment of loans to non-residents (with number of exceptions)
- prohibition of payment of dividends to non-residents (as an exception, dividends for 2014-2016 may be repatriated subject to certain conditions and schedule as defined by NBU regulation # 410 as of 13th of December, 2016 as amended)
- maximum 180 days period for settlements under foreign economic agreements
- prohibition of netting under foreign economic agreements if:
- obligations are in currency of 1st Group of Classifier of Foreign Currencies or Russian ruble; or
- obligations are in other currencies but total value of export agreement exceeds USD 500,000 equivalent
- detailed examination by the National Bank of Ukraine of all the foreign currency purchases at inter-bank currency market for more than USD 50,000 equivalent)
- purchase of currency and foreign currency transfers overseas are made not earlier than on the second working day from application for purchase (unless such transactions is banned by the National Bank of Ukraine)
- prohibition to purchase foreign currency at the cost of funds received as loan
- advance payments for import of goods if total value of such foreign economic agreement exceeds USD 5,000,000 has to be made through documentary letter of credit, confirmed by the bank rated not lower than investment class under Fitch Ratings, Standard & Poor’s, Moody’s or other leading world rating company. This requirement does not apply when import is financed by foreign export-credit agency, registered in the country which has official rating not lower than “A” category, confirmed by leading rating company (Fitch Ratings, Standard&Poor’s, Moody’s)
- others as prescribed by the temporary currency controls
Therefore the parties of the transactions should structure the payments or even whole model of relations with consideration for the rigid constraints imposed by foreign currency legislation of Ukraine. For this reason while planning your business operations, it is important to make sure that your account regime and current legislation allows to to perform necessary payment.
Financial Monitoring of Transactions
As in most countries, Ukrainian banks are empowered to perform identification of their clients and financial monitoring of transactions, performed by clients.
Criteria of transactions, which are subject to obligatory financial monitoring, are the following:
- if transaction is for amount above UAH 150,000 equivalent (for companies, engaged in gambling – UAH 30,000 equivalent)
- if funds are transferred from or to anonymous account
- if funds are transferred from or to country, recognized as offshore under Ukrainian legislation
- purchase for cash of checks, travel checks, other payment instruments and means of payment
- financial transactions with cash; payment for financial transaction with cash
- debiting accounts or making transfers to accounts, receiving loans or granting loans, other financial transactions if one of the party is located/registered in country, which does not full international and intergovernmental anti money-laundering recommendations or if one of parties has bank account in such country.
- transactions under foreign economic agreements if they do not envisage deliver of goods to Ukraine
- crediting account of legal entity or private entrepreneur, registered less than 3 month ago, or if this is first transactions from the account of such legal entity or private entrepreneur
- some others as prescribed in Ukrainian anti-money laundering legislation
Banks are allowed to require additional documents from their clients necessary for performing of financial monitoring and if the transaction has elements of crime, to stop financial transaction for 2 working days and notify authorized state authorities for their further investigation.
Additionally, Ukrainian banks are obliged to ensure that their clients are not engaged in so called “risky activity”. Ukrainian law stipulates criteria when activity is considered as risky, however the risky activity is rather value judgement.
Elements of risky activity:
- preforming transaction which does not have any economic sense, confirmed by documents
- performing transactions which can be related to out of funds, legalization of criminal income, money laundering, avoiding of taxation, conversion, cashing in of money, unlawful using of accounts
- transactions which can be related to avoidance of currency control rules, restrictions under baking or money-laundering legislation
- regular transactions of bank’s clients, aimed to use bank for money-laundering, financing of terrorism or making other crime
- performing transactions, which are confirmed by stolen, void or false documents
- performing transaction by public official if bank does not have evidence of official’s income
- repeated overseas payment by bank’s client under foreign economic agreement if there is information that client’s counter-party constantly does not perform its obligations
In cases, when banks considers that transaction has elements of risky activity, the bank is obliged to refuse to perform the transaction.
Legal entities registered in Ukraine (including subsidiaries of foreign companies) have to perform most of their settlements through banking channels. Such transfers require opening of corporate current bank account, which can be in national currency Hryvna or foreign currencies. Prior to opening bank account, the bank will require number of documents for identification of the new client, including those related to ultimate beneficial owner (information on UBO is mentioned in bank’s questionnaire).
Operating of corporate bank account is done in accordance with regime of the account and may not contradict Ukrainian legislation. All the settlements within territory of Ukraine can be made in national currency Hryvna. Using foreign currency for settlements within the territory of Ukraine, granting loans to non-residents, investments overseas and payments overseas other than under foreign economic agreements require individual license of the National Bank of Ukraine.
Due to rapid devaluation of national currency Hryvna, the National bank of Ukraine since 2013 have been implementing strict temporary currency control measures to stop further devaluation of Hryvna and rapid outflow of foreign investments from Ukraine. Even though, the NBU has declared gradual elimination of these measures starting from May, 2016, many of such restrictions are still in force.
Taking into account the above-mentioned, the parties of the transactions should structure the payments or even whole model of relations with consideration for the rigid constraints imposed by foreign currency legislation of Ukraine. While planning your business operations, it is important to make sure that your account regime and current legislation allows to to perform necessary payment.