When engaging in foreign economic activity, businesses become the focus of close scrutiny by various state authorities, including customs officials, tax authorities, the Ministry of Economy, and others. This attention arises because foreign economic activities result in foreign currency earnings entering Ukraine during exports, while during imports, currency is transferred abroad. Consequently, state authorities examine import operations conducted by Ukrainian resident businesses, particularly in terms of potential risks related to the outflow of significant amounts of foreign currency abroad. This could harm Ukraine’s banking system, weaken its economy, and devalue the hryvnia.
Currently, the National Bank of Ukraine has the authority to set deadlines for settlements under export and import transactions. Violations of these deadlines result in the accrual of penalties for each day of delay at a rate of 0.3 percent of the unpaid funds or the value of undelivered goods.
The provision requiring residents to pay penalties for violating the terms of monetary settlements under foreign economic agreements (contracts) remains in effect, creating significant financial risks for businesses.
Penalties are calculated by tax authorities through the issuance of tax notices-decisions following an inspection of compliance with foreign exchange legislation during foreign economic transactions. These inspections often identify instances of settlement deadline violations in foreign economic activity. In many cases, the procedure begins after the bank provides relevant information about such violations.
The law currently provides three grounds that exempt businesses from the obligation to pay penalties for violating settlement deadlines in export-import transactions:
- The occurrence of force majeure circumstances;
- Acceptance by a court or international commercial arbitration of a lawsuit filed by a Ukrainian resident entity engaged in foreign economic activity to recover debt from a non-resident due to the non-resident’s failure to meet the obligations stipulated in the foreign economic contract;
- Issuance by the Ministry of Economy of a conclusion extending the settlement deadlines for foreign economic transactions. Thus, if any of these circumstances apply, your company will not be required to pay penalties.
LEGAL ASSISTANCE REGARDING THE EXTENSION OF SETTLEMENT DEADLINES FOR FOREIGN ECONOMIC CONTRACTS includes the following services:
- Providing written consultations on the possibility of extending settlement deadlines for foreign economic contracts;
- Preparing a list of documents required for submission to the Ministry of Economic Development to request an extension of settlement deadlines;
- Assisting in the process of obtaining a conclusion on the extension of settlement deadlines for foreign economic transactions;
- Representing clients in disputes in courts and international commercial arbitrations regarding non-residents’ violations of their obligations under foreign economic contracts;
- Challenging tax notices-decisions on penalties for violations of settlement deadlines in the foreign economic sphere through administrative and judicial procedures;
- Appealing decisions of the Ministry of Economic Development regarding the refusal to extend settlement deadlines for foreign economic transactions.
Practice experience: 19 years
Specialization: litigation support, tax, customs and antitrust practices, agricultural law, IT and M&A
Practice experience: 21 years Specialization: support of economic, civil, labor and administrative disputes, energy
Practice experience: 11 years Specialization: tax, customs and corporate disputes, support of inspections, contractual activities
Practice experience: 6 years
Specialisation: business and civil law, tax and customs practice, corporate law, registration and reorganisation of business
Practice experience: 11 years Specialization: support of economic, civil, labor and administrative disputes, inspections
A decision by the Ministry of Economy to refuse an extension of settlement deadlines for foreign economic transactions can be appealed in court under the administrative judicial procedure.
It is advisable to include an arbitration clause in the foreign economic contract. This clause should specify the court or international commercial arbitration institution the parties will refer to in the event of a dispute, as well as the applicable law of the country that will govern the resolution of the dispute.
To suspend the calculation of settlement deadlines for export-import transactions due to force majeure, the original certificate from the Chamber of Commerce and Industry or a document from an authorized organization (body) in the country where the force majeure circumstances occurred is required.
The expiration of the timeframe for applying enforcement measures is grounds for exemption from liability for violations of foreign exchange legislation.
Currently, the law provides three grounds that exempt residents from the obligation to pay penalties for violating settlement deadlines in foreign economic transactions:
- The occurrence of force majeure circumstances;
- Acceptance by a court or international commercial arbitration of a lawsuit filed by a Ukrainian resident entity engaged in foreign economic activity to recover debt from a non-resident due to the non-resident’s failure to fulfill obligations stipulated in the foreign economic contract;
- Issuance of a conclusion by the Ministry of Economy extending the settlement deadlines for foreign economic transactions.
To avoid violating settlement deadlines for foreign economic transactions, the document package must be submitted before the deadline expires. This should account for the time required to review the documents and for the Ministry of Economy to issue a decision on granting a conclusion to extend the settlement deadlines for foreign economic transactions.
The submitted documents are reviewed, and a decision to issue a conclusion or refuse its issuance is made within 10 business days from the date of submission of the document package.
- An application for obtaining the conclusion, including justification for the need to extend the established settlement deadline for a specific period;
- Copies of the foreign economic contract (agreement), including all specifications, annexes, addendums, and other documents that are integral parts of the contract. If the contract is in a foreign language, a Ukrainian translation must be provided;
- Copies of documents confirming the transaction involving the export (import) of goods: bank payment documents, bank certificates, customs declarations, bills of lading, transportation documents, acts of acceptance-transfer of goods (performance of works, provision of services);
- Copies of correspondence with non-resident counterparties explaining the need to extend the established settlement deadlines.
