Bulgaria - Introduction of Euro as Official Currency

After several years of hard work, Bulgaria has finally adopted a law introducing the Euro as an official currency and amended the Credit Institutions Act. This is a crucial milestone, and it's important to note that further steps are required to complete this process. 

One of the crucial tasks ahead is adapting all systems related to accounting and VAT, including implementing special rules for the transitional period from BGN to EUR. 

Impact on VAT and Next Steps in the Process

Replacing one currency for another as an official currency brings particular challenges for the government and other parties involved. One of those challenges is calculating and reporting VAT and price labeling for goods and services offered during the transitional period.

During the transitional period, all businesses must display prices in both BGN and EUR, with a fixed conversion rate applied. Adhering to the rounding rules during this period, which will last 12 months from the date of the euro's adoption, is necessary.

On the date of the introduction of EUR, all balance sheets in accounting systems stated in BGN will be converted into EUR, and all assets and liabilities will be recalculated to EUR. Also, once EUR becomes an official currency, all deposits, savings, and other bank accounts will be converted into EUR.

The tax documents, including VAT returns and reports, will display information in the currency that was official at the end of the reporting period. However, since there will be a double circulation period of BGN and EUR, all the values in VAT returns and reports will be stated in EUR during that period. 

When businesses must submit a corrective return or declaration, the values will be stated in the official currency at the end of the period for which the corrective declaration or document is submitted.

However, Bulgaria must take several other steps until it reaches its goal of introducing the Euro as the official currency. This includes ensuring the price stability of the BGN in correlation to the EUR, adopting a Decision on the Introduction of the Euro with the exact date of this historical change, and publishing other relevant documents and guidelines for rules applicable during the transitional period.

Conclusion

The Bulgarian government is determined to introduce EUR as its official currency starting January 1, 2025. Whether this will happen within this timeline or be delayed remains to be seen in the following months. Nevertheless, all companies operating in Bulgaria should prepare for this inevitable change and adjust their price display systems in stores and on websites, accounting systems, and VAT-calculating systems.

Furthermore, it is recommended that staff who will work directly with consumers be trained, especially since there will be a short period when both BGN and EUR will be in circulation.

Source: National Assembly Official Gazette No. 70, CMS, UniCredit Group