A Few Practical Hints about Cross-Border Financing in Ukraine

The high cost of funding available on the domestic market often prompts fast-growing Ukrainian businesses to seek financing opportunities abroad. Despite offering comparatively lower rates, many foreign creditors are still attracted by the profitability of lending projects in the Ukrainian energy sector, metallurgy, farming, food production and retail.

Obviously, the continuing instability in the world economy has diminished the diversity of available funding channels by temporarily suspending unsecured debt instruments such as Eurobonds. However, financing can still be secured through bilateral and syndicated loans to borrowers offering seal-proof security and backed by local affiliates' or foreign parent company guarantees.

If compared with other financial instruments, the Ukrainian legislation applicable to "traditional" loans establishes strict rules. Although no transaction is alike, this article aims to briefly outline local rules a foreign lender should always bear in mind while providing a loan in Ukraine.

Loan Agreement

The loan amount is usually distributed to the borrower by way of crediting an account opened with the loan servicing bank in Ukraine or by a direct payment to the borrower's counterparty under the relevant foreign trade contract. Another option is disbursing to a borrower's account opened abroad, which requires prior obtaining of an individual license from the National Bank of Ukraine (NBU) and, therefore, is rarely used in practice.

Ukrainian law allows the choice of foreign law to apply as the governing law of a loan agreement. However, in order to make it enforceable, parties should ensure its compliance with certain mandatory requirements. Under Ukrainian law, the loan agreement must be set out both in Ukrainian and the language chosen by the parties and contain inter alia a statement of purpose, term, interest, bank details of both the lender and the borrower, and a provision that the loan agreement shall become effective upon the NBU registration.


Generally, agreements providing for loans from foreign lenders must be registered with the NBU. This registration is a condition for making any disbursements or payments under the loan agreement. The relevant application, together with a standard-form notice and the loan agreement, is submitted by the borrower to the loan servicing bank. The latter has four business days to review the set of documents and approach the NBU for registration of the loan agreement or return the documents to the borrower for further changes. The legally prescribed term for the registration constitutes five business days calculated starting from the day following the submission to the NBU of the full set of documents required for registration. However, the mentioned term can move by up to three business days if additional information is required by the NBU.

Interest cap

The NBU establishes an interest cap on the loans from foreign lenders (other than International Financial Institutions), which extends to the true interest, fees, default payments and charges established under the loan. The interest caps on fixed rate loans vary depending on their term: 9.8 per cent per annum (p.a.) for less than one year loans, 10 per cent p.a. for one to three year loans and 11 per cent p.a. for more than three year loans. The interest cap on floating rate loans is 3-month LIBOR plus 750 basis points.


Under Ukrainian tax law, a foreign lender is subject to a 15 per cent withholding tax on income derived in Ukraine as interest under a loan to a Ukrainian borrower, provided that such income is not attributable to a permanent establishment of the lender in Ukraine, and unless the provisions of the applicable tax treaty between Ukraine and the lender's jurisdiction provide otherwise. Under the applicable treaty between Ukraine and the respective state on the avoidance of double taxation, the rate of taxation of interest received by the qualifying lender under the loan may be reduced or brought down to zero per cent.

Other news
05 December 2023
Asters is a new member of the London Chamber of Commerce and Industry
05 December 2023
Asters and IT Ukraine Association held webinars on Global Legal Support for Ukrainian IT
04 December 2023
There is not enough information about Ukraine. Conclusions after the ReBuild Ukraine conference in Warsaw
01 December 2023
Asters Energy Policy Pulse (volume 19)
This site uses cookies to offer you better browsing experience.
Toggle high contrast
Toggle normal contrast
Toggle big fonts
Toggle normal fonts