New Rules on Cash Receipt by Business Entities from Banks

New rules for banks to study business entities-clients receiving cash for subsequent cash settlements

Many have probably already been puzzled and concerned by the changes and innovations introduced by the National Bank of Ukraine regarding the strengthening of supervision over cash settlements and the conduct of cash operations by banks.

By Resolution of the NBU Board No. 62 dated 18.04.2019 "On Approval of Amendments to the Instruction on Cash Operations by Banks in Ukraine", new rules were introduced for banks to study business entities-clients receiving cash for subsequent cash settlements, which came into effect on June 3, 2019.

In its Resolution, the NBU introduces the obligation for banks to obtain supporting documents from clients when receiving cash from the bank, which serve as the basis for subsequent cash settlements. The stated purpose of this innovation is the need to refute or confirm the execution of fictitious financial transactions.

We immediately draw attention to the fact that this requirement for providing documents to the bank when receiving cash applies exclusively to business entities-clients, and not to ordinary citizens of Ukraine who receive cash from the bank.

What supporting documents must be provided to the bank

The mentioned NBU Resolution contains a list of such supporting documents that must be provided to the bank.

Among them are the following:

1. Purchase act or statement
2. Tax calculation of income amounts accrued (paid) in favor of individuals, and amounts of tax withheld from them.
3. Loan agreement.
4. Supply, storage, transportation agreements, etc.

We emphasize that the mentioned requirement for providing supporting documents does not contain limitations on the amount of cash withdrawal operations, which means that business entities must be prepared to provide the bank with documents for any amount upon its request.

Does this apply to individual entrepreneurs?

The biggest question that arises in this context is whether this requirement applies to individual entrepreneurs who have relevant bank accounts and withdraw cash.

In our opinion, the mentioned changes regarding individual entrepreneurs providing documents to the bank when withdrawing cash, based on which subsequent cash settlements are made, apply only to cash that will be used by individual entrepreneurs for business purposes.

According to Article 44 of the Commercial Code of Ukraine, entrepreneurship is carried out on the basis of free disposal of profit remaining with the entrepreneur after paying taxes, fees, and other payments provided by law.

Thus, an individual entrepreneur has the right to freely use funds from a current account (including withdrawing cash) opened for entrepreneurial activity, provided that all taxes, fees, and other payments stipulated by current legislation are paid, so this norm should not apply to them.

If some banks have a different approach to interpreting these NBU requirements, in such a case, we recommend insisting that this norm does not apply to individual entrepreneurs who will withdraw cash for their own personal needs after paying all taxes and fees. After all, this would be a direct restriction of a person's right to use their profit, which is properly declared and from which taxes are paid.

If you need a legal consultation - please contact us, we will be happy to help.