UKRAINE: TAX AND LEGAL NEWSLETTER

Ernst & Young Ukraine, Kyiv, Ukraine, Thu, 15 July 2010

UKRAINE: TAX AND LEGAL NEWSLETTER

Ernst & Young Ukraine, Kyiv, Ukraine, Thu, 15 July 2010

KYIV - Ernst & Young Tax and Legal Newsletter July 15, 2010: Contents:

     [1]  Order of operations with special payment instruments changes
     [2]  New requirement for minimum bank regulatory capital takes force

Order of operations with special payment instruments changes
On 6 July 2010 the Ministry of Justice of Ukraine registered Regulation of the National Bank of Ukraine "On Conducting of Operations with Special Payment Instruments" No 223 of 30 April 2010. The Regulation approves changes to the "Order of Issuance of Special Payment Instruments and Conducting of Operations with Them."

Regulation No 223, except for certain of its articles, will come into force when it is published.

The Regulation modifies the current order of use of special payment instruments, which in Ukraine are mostly represented by credit or debit cards.

These provisions will take force after publication:
     [1] The list of conditions that must be included in agreements between a cardholder and an issuer bank will become longer;
     [2]  Banks will be obliged to provide clients with free of charge monthly account statements;
     [3]  Issuers will be obliged to refund immediately to clients any non-authorized transactions if the clients inform them about the transactions without delay. Issuers will also be liable for returning clients’ accounts to the initial amounts;
     [4]  The permissible cash withdrawal limit in UAH that an issuer bank is allowed to set up must not be less than two minimum salaries. At present it is UAH 1,776. A cardholder has the right to change the limit, except if the National Bank of Ukraine has established the limit;
     [5]  Customers are not responsible for any transactions made without the direct provision of the payment instrument or made in the absence of electronic verification of the instrument and its holder. (Exceptions may apply if there is evidence that cardholder sustained the transaction by an direct or indirect action on his or her part, including disclosing the PIN or any other important information.);
     [6] Issuer banks that participate in payment systems and that issue or/and acquire special payment instruments, except for payment cards, should provide the National Bank of Ukraine with Reports on Bank Activity by 1 August 2010. The Regulation also stipulates the form that the report must take.

In addition, Regulation No 223 includes articles that will take force in 2011-2012.

These requirements will become effective on 1 January 2011:
     [1]  The maximum foreign currency cash withdrawal via ATMs will be limited to the equivalent of UAH 5,000;
     [2]  The maximum value of prepaid special payment instruments will be limited to the equivalent of UAH 5,000 and UAH 2,000 for domestic and international instruments, respectively;
     [3]  Any payment system service fees or charges related to domestic settlements involving special payment instruments issued by resident banks of Ukraine must be paid in Ukrainian currency only and via a Ukrainian bank;
     [4]  According to the Regulation, a resident bank is the only place where a security deposit (or other guarantee of that payment system members o participants will fulfill their obligations) can be retained. This provision applies only to security deposits or guaranties related to transactions within the territory of Ukraine.

On 1 January 2012 there will take force the requirement that issuers (or acquirers) must inform customers about the exact cash withdrawal fee prior to the initiation of a transaction. Customers will also be able to decline the transaction. 

New requirement for bank minimum regulatory capital takes force
On 17 July 2010 the Regulation "On Amending Changes to Several Normative Acts of the National Bank of Ukraine" No 273 of 9 June 2010 will take force. The Regulation raises requirements for minimal bank regulatory capital. Now it will be UAH 120 million.

Any bank that on that date lacks sufficient regulatory capital will be:
     [1] Obliged to increase its regulatory capital to the minimum level by 1 January 2012;
     [2] Until the requirements are met, banks may attract cash deposits from individual persons or open/add banking accounts for them; but the total attracted funds must not exceed the amount that the bank had in fact attracted as of the date the Regulation became effective. 

CONTACT:  Ernst & Young LLC, Mykhailivska Street 7 | 01001 Kyiv | Ukraine, Phone: +380 (44) 490 3000; Fax: +380 (44) 490 3030; Website: www.ey.com/ukraine

NOTE: Ernst & Young is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.