Bulgarian finance ministry publishes draft Introduction of Euro into the Republic of Bulgaria Act

On 25 March 2024, the Bulgarian Ministry of Finance (MF) introduced for public consultation the long-awaited bill of Introduction of Euro into the Republic of Bulgaria Act (IERBA), which closely follows the main points under the blueprint published by the MF in late 2022.

The IERBA addresses the main issues identified by the preliminary assessment of the adoption of the euro through the following:

• the establishment of general and specific rules in relation to rounding after conversion from BGN to EUR with the “general rule” being the converting of values at the specified rate and rounding the result to the second decimal place, and the “exceptions rule” for specific asset classes (e.g. shares in collective investment schemes, shares in supplementary pension funds, variable interest rates under loan agreements) where the second decimal place should be rounded up in the case that the third digit after the decimal point is other than zero. An exception to the general rule is also provided for rules for the currency conversion of the registered capital of companies.
   
• information and transparency on price revaluation, which will be achieved through a “dual pricing period” during which prices and other monetary amounts to be paid, credited and debited will be displayed and presented to citizens in both BGN and EUR. This obligation will begin one month after the date of entry into force of the decision of the Council of the European Union on the adoption of the euro by the Republic of Bulgaria and will remain in force for one year after the introduction of the euro.
   
• adoption of a transitional period for citizens, in which both currencies would be considered legal tender for the purpose of allowing for a smooth exchange of banknotes and coins from BGN to EUR. Taking the “Big Bang” approach, the period will be one month for the transition between BGN and EUR.
   
• regulation of the procedure for the circulation of the new currency and the exchange of BGN banknotes and coins into euro.
   
• establishing rules relating to the adaptation of the information systems for the adoption of the euro, and the adaptation to the introduction of the euro of registers, accounting documents, documents relating to tax and social security obligations.
   
• appointment of regulatory bodies and institutions, which would control compliance with the requirements of the IERBA, namely the Bulgarian National Bank, Financial Supervision Commission, National Revenue Agency, Commission for Consumer Protection and Minister of e-Government.

The bill includes amendments to several laws in order to adapt this legislation to the single European currency based on the following two principles:

• the principle of automaticity, according to which the values indicated in BGN in existing legal instruments are considered as values in euro when applying the official exchange rate and in accordance with the rules of conversion and rounding set out in the draft law;
   
• the principle that when the monetary amount in BGN stipulated in a law is the result of the implementation in Bulgarian legislation of a legal act of the European Union, which explicitly indicates the corresponding amount in euro, the amount in euro is implemented according to the legal act of the European Union.

The Council of Ministers and the MF  1 January 2025 as the date of the adoption of the Euro in Bulgaria. Due to ongoing political uncertainty in the country and inflationary pressure on the national level, however, this date remains a possibility, but it is far from certain that adoption will take place at that time. CMS expects more clarity on the matter towards the middle of the year when it will be known whether the level of inflation is in line with the Maastricht criteria.

The public consultation on the draft legislation will continue until 24 April 2024, after which the bill should be submitted to Bulgaria’s parliament. The proposed act will be subject to change at each of these stages and will only enter into force after its adoption in two readings and promulgation in the State Gazette.

For more information on this draft act and how Bulgaria’s planned adoption of the euro could affect your business, contact your CMS client partner or these CMS experts: Elitsa Ivanova and Konstantin Stoyanov.