How to pay a US company legally from Ukraine

Quick answer

Paying a US company from Ukraine involves navigating specific foreign exchange controls imposed by the National Bank of Ukraine (NBU) since 2022. Under the US-Ukraine tax treaty, withholding tax on dividends is typically 15% (or 5% for qualifying direct dividends), interest is 0%, and royalties are limited to 10%. Payments for services are generally not subject to withholding tax if there is no permanent establishment in the US. While SWIFT remains a primary payment rail, the NBU's FX restrictions necessitate careful compliance. Keystone Bridge can assist in optimising payment corridors and ensuring treaty compliance amidst these regulations.

The regulatory picture

Payments from Ukraine to US companies are primarily governed by the National Bank of Ukraine (NBU), which acts as the country's central bank and financial regulator. Following the full-scale invasion in February 2022, the NBU implemented stringent foreign exchange (FX) controls and capital account rules to maintain financial stability and prevent capital outflow [5] [6]. These measures significantly restrict outbound USD payments, requiring businesses to adhere to strict regulations for cross-border transactions.

While the NBU has gradually eased some restrictions, a comprehensive framework of capital controls remains in place. For instance, payments for imported goods delivered before 23 February 2021 may still be subject to specific limits [9]. However, the NBU has also made provisions for certain types of payments, such as allowing legal entities to purchase and transfer foreign currency for dividends to foreign shareholders [12], and permitting cross-border payments for registration, arbitration, and court fees without restriction [11]. Any outbound payment must be carefully assessed against the prevailing NBU regulations to ensure compliance.

The US-Ukraine Income Tax Treaty, signed in 1994, aims to prevent double taxation and fiscal evasion between the two nations. For Ukrainian residents paying US companies, the treaty provides reduced withholding tax (WHT) rates on certain types of income. Specifically, dividends are subject to a 15% WHT, which can be reduced to 5% for qualifying direct dividends (Article 10(2)i) [1]. Interest payments are exempt from WHT, set at 0% (Article 11(1)i) [1]. Royalties are generally subject to a maximum WHT rate of 10% (Article 12i) [2]. Payments for services, particularly business profits not attributable to a permanent establishment in the US, are typically not subject to US withholding tax [3] [4]. It is crucial for Ukrainian businesses to understand these treaty provisions and ensure proper documentation, such as IRS Form W-8BEN-E, to claim treaty benefits.

Common mistakes

• Ignoring NBU FX Controls: Many entrepreneurs overlook the strict foreign exchange controls imposed by the National Bank of Ukraine, leading to payment delays or rejections. It's essential to verify the latest NBU regulations for outbound payments.
• Incorrect WHT Application: Failing to correctly apply the US-Ukraine tax treaty provisions for withholding tax on dividends, interest, or royalties can result in overpayment of taxes or penalties. Proper documentation (e.g., W-8BEN-E) is often required to claim reduced treaty rates.
• Lack of Proper Documentation: Inadequate or incorrect documentation, such as invoices, contracts, or proof of services, can cause significant delays and compliance issues with both Ukrainian and US authorities.
• Choosing Unsuitable Payment Methods: Relying solely on traditional banking channels without considering the impact of NBU restrictions or exploring alternative fintech solutions can lead to inefficient and costly transfers.

The practical path

1. Verify Invoice and Contract Details: Ensure the US company's invoice is accurate, complete, and aligns with the services or goods provided. The contract should clearly state payment terms, currency (UAH or USD), and banking details. For services, ensure the contract specifies that the services are performed outside the US to avoid potential US tax implications.
2. Confirm US Bank Details: Obtain the US company's full bank details, including the bank name, SWIFT/BIC code, account number, and routing number. Double-check these details to prevent misdirected payments.
3. Navigate NBU FX Regulations: Consult with your Ukrainian bank or a financial advisor to understand the current NBU foreign exchange controls applicable to your specific payment type. Prepare all necessary supporting documents required by the NBU for outbound currency transfers. This may include contracts, invoices, and justifications for the payment.
4. Choose Payment Method: While SWIFT transfers are generally available, be aware of potential delays due to NBU scrutiny. Explore local Ukrainian banks that have experience with international payments and can guide you through the FX control process. Some Ukrainian banks, such as PrivatBank or Oschadbank, offer international transfer services. For larger or more complex transactions, consider engaging a specialist payment provider like Keystone Bridge that can navigate these complexities and potentially offer more efficient corridors.
5. Initiate the Transfer and Retain Records: Submit the payment request to your bank with all required documentation. Keep meticulous records of all transaction details, NBU approvals, bank confirmations, and tax forms (e.g., W-8BEN-E) for future audits or inquiries from both Ukrainian and US tax authorities.

Edge cases

• Large Amounts: Payments exceeding certain thresholds may trigger additional scrutiny from the NBU, requiring more extensive documentation and potentially longer approval processes. It is advisable to consult with your bank or a financial expert for large-value transactions.
• Existing USD Accounts: While some Ukrainian businesses may hold USD accounts, converting UAH to USD for outbound payments is subject to NBU regulations. The ability to use existing USD funds for international transfers will depend on the source of these funds and current FX controls.
• Payments to Individuals vs. Companies: The regulatory and tax implications can differ significantly when paying a US individual versus a US company. Payments to individuals may involve different tax forms (e.g., W-8BEN for individuals) and potentially different reporting requirements.
• Sanctions and OFAC Considerations: While SWIFT restrictions primarily targeted Russian banks, it is crucial to remain vigilant about any evolving sanctions environment. Ensure that neither the US company nor its beneficial owners are on any sanctions lists (e.g., OFAC's SDN list) to avoid legal repercussions.
• Central Bank Approval Thresholds: For certain types of transactions or amounts, explicit approval from the NBU might be required. These thresholds and requirements can change, so continuous monitoring of NBU announcements is essential.

When you don't need us

If you are making a straightforward payment for goods or services to a US company, the amount is relatively small, and you have a clear invoice and all necessary documentation, your local Ukrainian bank may be able to process the payment without specialist assistance. This is particularly true if the US company has provided a valid W-8BEN-E form and the payment falls clearly within established NBU guidelines for outbound transfers. If you have a long-standing relationship with your bank and they are familiar with your international payment needs, they can often guide you through the standard process.

What we do

Keystone Bridge assists Ukrainian entrepreneurs in navigating the complexities of paying US companies, focusing on invoice structuring, ensuring compliance with the US-Ukraine tax treaty, and optimising payment corridors amidst NBU foreign exchange controls. We help streamline the process, minimise risks, and ensure efficient cross-border transactions. General information, not tax or legal advice. Rates and rules change; verify with a qualified adviser before acting.

For the broader picture on this topic, see our guide on how to pay a US company from your country.

See also

• Best Payment Processors for Non-Residents — Full Comparison For more context, see opening a US account from Ukraine.