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Foreign Exchange Restrictions for Legal Entities

With effect from 10 May 2015 the National Bank of Kazakhstan (the “NBK”) has introduced foreign exchange (“FX”) restrictions for legal entities. The relevant Resolution has been adopted by the NBK on 16 March 2015, which amends the Rules on Carrying out Foreign Exchange Transactions. Such Rules regulate the procedure of carrying out certain cross-border transactions in terms of making payments under cross-border transactions and sale and/or purchase of foreign currency, as well as set out FX restrictions, such as registration or notification currency regimes of certain cross-border transactions to the NBK.

New FX Rules

New FX rules for legal entities are the following.
Legal entities (except for banks and currency exchange offices, established in Kazakhstan) may purchase and/or sell foreign currency on the local currency market through banks, established in Kazakhstan, on the basis of the relevant application for purchase and/or sale of foreign currency. While purchasing foreign currency, it is required to indicate the purpose and the amount of foreign currency exchange, to be purchased, in the relevant application.

If a resident legal entity intends to purchase foreign currency in the amount exceeding the equivalent of US$100,000, it should also present to the bank a copy of a currency contract (i.e. a cross-border agreement) and/or other documents, confirming the purpose and amount of foreign currency to be purchased. The bank should verify whether the purpose and amount of the foreign currency indicated in the application correspond to the currency contract.

Meanwhile, a non-resident legal entity may purchase and/or sell foreign currency, on the basis of the application only, by indicating the purpose and amount of foreign currency, to be purchased and/or sold.

Conclusion

Thus, the amendments provide significant restrictions for resident legal entities to purchase foreign currency, so that they may purchase foreign currency, exceeding the amount of US$100,000, only if the underlying documents, confirming the payment in foreign currency, are presented to the bank. Meanwhile, the previous version of the Rules on Carrying out Foreign Exchange Transactions provided that resident legal entities could purchase foreign currency without restrictions for whatever purposes and without filing a currency contract.
We consider that the above amendments are one of the steps taken by the NBK for de-dollarisation of the Kazakhstan economy.

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