Everyone who has dealt with export or import transactions in one way or another is aware of the risks that arise in the process of foreign trade. However, not everyone knows that in addition to the bad faith of the counterparty, difficulties in the customs clearance process or currency risks, the company may also be penalized for non-receipt of funds on account or non-delivery of paid goods.
For those who have never encountered this, the situation may seem rather strange. After all, why charge a penalty if the company has not received its own income for the goods sold or services provided or has not received paid goods. However, such is the Ukrainian currency legislation, the main purpose of which is to prevent the outflow of capital from the country and ensure the stability of the economy. However, many entrepreneurs do not know about the state's currency sanctions until the tax comes with an inspection.
That is why in this article we decided to highlight the topic of sanctions for non-receipt of foreign exchange earnings from export-import transactions, namely: the accrual of penalties and how to avoid it.
Let's start with the fact that from 2019 the deadline for payments for export-import operations doubled from 180 days to 365. That is, now the company has a year to receive paid goods or to receive funds for the delivered goods.
Currency supervision is carried out by operations on export and import of goods, including import operations without import of products into the territory of Ukraine, if at the time of export goods not fully paid or at the time of payment for the imported goods actual delivery not yet made.
It should be noted that under the definition goods fall any products, services, works, intellectual property rights and other intangible rights intended for sale.
From what date does the calculation of the term begin?
- for export transactions - from the date of registration of the customs declaration or signing of the act or other document confirming delivery (if the goods are not subject to customs registration);
- for import transactions - from the date of payment (debiting funds from the account).
!! Deadlines are not set for export or import transactions, the amount of which does not exceed UAH 400,000.
If within the established 365 days the funds for the exported goods have not been paid or the goods under the import contract have not been delivered, a penalty begins to accrue.
Penalty size is 0.3 % of the amount unreceived funds (value of undelivered goods) for each day of exceeding the deadline (365 days) and may not exceed the unreceived amount of funds (value of goods). That is, the accrual of the penalty ceases when its amount is equal to the amount of unreceived funds (undelivered goods).
If you need advice on sanctions for non-receipt of foreign exchange earnings from export-import transactions, contact us for help
The order of accrual of interest
The bank in which the account of the enterprise is opened, to which the funds from the delivery of the goods are to be received or from which the value of the imported goods was paid, carries out currency supervision over these operations. The National Bank approves the instruction, which provides general provisions for the implementation of foreign exchange supervision by banks. If the NBU instruction does not directly determine on the basis of which document or under what conditions the transaction is withdrawn from foreign exchange supervision, the bank determines the mechanism of such supervision independently.
If in the course of supervision the bank finds that the terms of settlements / deliveries are violated, the bank reports about these circumstances tax authorities, because they are authorized to charge a penalty.
However, the collection of fines is possible only for results documentary checks.
That is, the tax receives information from the bank and comes to the company with a check. It sometimes happens that the tax authorities independently detect violations of payment deadlines, for example, during a scheduled inspection.
According to the results of the inspection, the revealed violations of the currency legislation are recorded in the act. Then the tax is drawn up notice-decision (PPR), which is the basis for the payment of fines.
Of course, the company is not obliged to unconditionally agree with such a tax decision. You are right go to court with a demand for the abolition of PPR, which accrued a penalty.
Quite often, companies are hostage to a situation where payment for the goods is not received only due to the bad faith of the counterparty. However, there are cases when deadlines are missed due to objective circumstances. In this case accrual of interest stops.
Such circumstances are:
- force majeure. They must be confirmed by a certificate from the Chamber of Commerce or other competent institution located in the debtor's country of residence. The accrual of interest continues from the end of such circumstances.
- litigation to recover a debt or demand goods. In this case, these circumstances must be confirmed by a court decision to initiate proceedings. The accrual of fines stops immediately after going to court. However, if the court refuses to satisfy the claim, the penalty is resumed from the date of suspension, ie from the beginning of the case in court. In the event of a decision in your favor, even if the debt is not actually collected and the funds are not credited to the account, the penalty can no longer be accrued.
- out-of-court recovery / recovery of goods. If the contract provides for an out-of-court method to force the debtor to pay or deliver the goods, the penalty is suspended from the moment of presenting the body authorized to make such penalties, a document confirming the right to receive funds or demand the goods. A striking example of such an out-of-court method of collecting funds can be a notary's writ of execution. That is, such a body will be a notary, to whom you need to provide a notarized contract and documents proving the debt. In other countries, the authorities authorized to recover extrajudicial funds may differ.
Fine stops to accrue when the transaction is removed from currency control. This may be due to crediting funds to the company's account or delivery of goods in full. Also, the penalty ceases to accrue if the amount of funds not received is less than UAH 400 thousand, as currently transactions for such amounts are not subject to currency supervision.
As for the position of the courts, there is currently no single case law on appealing decisions on the imposition of such fines. First of all, this is due to a change in legislation that took place not so long ago. The practice of charging fines for the period covered by the new law has not yet taken shape. As for the transitional period of two different laws, the courts make rather ambiguous decisions.
Time will tell how the current case law will be formed. Therefore, in conclusion, we should not expect to wait for the delivery of PPR. Control the terms of settlements under your contracts yourself and timely apply to the court with a claim for recovery.
We also recommend that you think in advance about the probable scenario of accrual of interest and at the stage of concluding the contract to provide for the possibility of collecting the accrued interest from the counterparty.
If you need advice on sanctions for non-receipt of foreign exchange earnings from export-import transactions, contact us for help
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