Can the Service Cost Be in Foreign Currencies

It has become common for our country that little people trust the national currency, and even a retired grandma prefers stuffing her savings into a glass pot in American dollars. So no wonder that business people stick to foreign currencies in their pricing policy.

1. Web company is not a charity but a business. Like the rest of citizens of our country, they want to make a profit in any case even when a currency rate changes.

2. Website development usually takes a few months and then year 2008 comes to my mind when signing a contract the cost was equivalent to $5,000 and only $3,000 when it was closed out. You don't have to be a great mathematician to notice the difference.

3. Psychological effect. Hearing and taking the price in a few hundred nominal dollars is much easier than a few thousand hryvnias.

Let's be realists, what matters for most people are the price of the service and its quality but not currency and love to the Ukrainian. When it comes to signing a contract, some clients nearly have a fit of hysteria because the contract is pegged to the euro. As a rule, when lawyers or accountants join the conversation, the issue is settled. However, it would be good to put the things right and refer to the legislative acts which tackle this issue. I have learned a lot of articles, tips in blogs and forums as well as lawyers and accountants' opinions. So let's take a look at the Civil Code of Ukraine.

Article 524. The currency of the Obligation 1. The obligation shall have to be expressed in the currency of Ukraine – hryvnia.

2. The parties may determine a monetary equivalent of obligation in the foreign currency.

Article 533. Currency for Fulfillment of Obligation 1. Currency liabilities must be fulfilled in hryvnia. 2. If a money equivalent in obligation is determined in foreign currency, the amount due to payment in hryvnia shall be determined according to the official exchange rate for the respective foreign currency at the day of payment, unless a different procedure for its determination is established in a contract or act of law. 3. Use of foreign currency and payment documents in foreign currency to make settlements on obligations at the territory of Ukraine shall be allowed in the cases, per the procedure and conditions established by law.

Conclusions.

You cannot indicate the cost in foreign currencies in an agreement between residents; however, the cash equivalent of the contract value can be expressed in foreign currencies. In other words, even though the cost is in hryvnias, but in case the currency rate mentioned in the contract changes, the cost will be recalculated. If the prices in the contract are in foreign currencies, the total sum, which has to be paid in hryvnias, is determined at the official currency rate at the moment of payment. Invoices are definitely made out in Ukrainian hryvnias. The most exact formulation, in this case, is: “The service cost under the contract is 11 000 000 hryvnias which are 1 000 000 euros at the moment of signing the contract. The payment is made in hryvnias, but the total sum is determined at the official euro rate of the National Bank of Ukraine at the moment of payment”.

Provisions of the Civil Code allows to use such wording of contracts and the provisions of the Economic Code of Ukraine do not contain any direct prohibition on their use. All in all, such wording is considered legitimate in business contracts between residents.

Hopefully, the situation in Ukraine will improve, and we won't worry about the exchange rate of hryvnia and as a result, establish the payments relations in hryvnias and not in the foreign currencies.