Legal Newsletter: Law for the Euro Implementation adopted in Bulgaria
In brief
The new Law for the Euro Implementation in Bulgaria (“LEI”) was recently adopted by the Bulgarian Parliament and promulgated in State Gazette on 20 August 2024. The law aims to procure that all conditions relevant for Bulgaria’s smooth currency transition from Bulgarian lev (BGN) to Euro (EUR) are in place so that the country is fully prepared to apply the new currency once it is officially accepted in the Eurozone by the Council of the EU. The currency conversion shall become effective as of the date indicated in the Decision of the Council of the EU for accepting Bulgaria in the Eurozone (the “Conversion Date”).
Continue reading to discover the major novelties introduced with LEI.
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Exchange rate
As of the Conversion Date, the official currency in Bulgaria shall be the Euro. The official exchange rate of the Bulgarian lev to the Euro shall be the officially established rate of EUR 1 = BGN 1.95583. LEI provides for specific rules on rounding and the conversion from BGN to EUR.
Temporary dual currency
- Within one month as of Conversion Date, BGN notes and coins shall continue to be legal tender in Bulgaria alongside the EUR (the “Dual Currency Period”). During the Dual Currency Period, any cash payments (including such for public liabilities) may be carried out in either of the two currencies. After the expiry of the Dual Currency Period, the EUR shall remain the only legal tender in the country.
- During the Dual Currency Period, merchants are obliged to return change and make refunds to customers in EUR only (exceptions are allowed on a case-by-case basis, only if the payment in EUR is not practically feasible in the particular case). Automated and self-service payments will also accept payments in EUR only.
- Dual currency period does not apply to cashless payments. As of the Conversion Date, all cashless payment transactions shall be executed in EUR only.
Temporary dual indication of prices in BGN in EUR
- One month as of the Conversion Date and until the Conversion Date’s first anniversary (the “Dual Indication Period”), all merchants and service providers should indicate prices of their goods and services both in BGN and EUR currency (including in their advertising materials). LEI provides for specific rules for display of the dual indication. The Law also provides for certain exemptions where the dual indication obligation shall not apply.
- Within the Dual Indication Period, the merchant should procure that the price of the purchased goods or services is indicated both in BGN and EUR in the respective document evidencing customer’s payment (e.g. cash receipt).
- The obligation for dual indication of prices during the Dual Indication Period is also applicable to the providers of financial services (i.e. credit institutions, payment service providers, e-money firms, investment firms, insurance providers, fund managers etc.). They shall update their tariffs for fees and commissions to indicate their prices both in BGN and EUR and shall make this information easily accessible for their clients. Dual indication shall also be procured in other cases throughout their ongoing activity (for example, in the statement of account with respect to BGN payment accounts, in case of ATM cash withdrawals, etc.)
Cash exchange of BGN for EUR
- Bulgarian National Bank shall exchange any notes or coins in BGN to EUR under the official exchange rate, free of charge and for unlimited time.
- Exchange of BGN notes and coins to EUR shall also be offered by Bulgarian credit institutions and Bulgarian Post. For the first six months as of Conversion Date such service shall be delivered free of charge, where after that period the exchange service may be subject to a fee determined by the respective entity. One year as of the Conversion Date, the credit institutions and Bulgarian Post may cease to provide such exchange services.
Other Significant matters affected by the currency conversion
- All bank credits and deposits in BGN shall be converted in EUR on the Conversion Date.
- Interest rate on BGN credits shall be converted according to bank’s methodic which should guarantee that the interest rate converted in EUR is equivalent to the amount in BGN prior to the conversion. Conversion of variable interest rates shall be conducted in a manner provided in the LEI which guarantees that the financial position of the borrower should not be deteriorated in any way as a result of the currency conversion.
- All types of accounts (e.g. any current, deposit, budgetary, savings, etc.) with banks or other payment service providers, which are currently held in BGN shall be automatically converted in EUR. The conversion shall be a one-off event and shall be free of charge. No transition period shall apply to these accounts, i.e. as of the Conversion Date, the account holders shall be able to withdraw funds in EUR from their accounts both from ATM/POS and on desk with the respective service provider. As of the Conversion Date, all wire payment transactions shall be executed in EUR only.
- The registered capital of Bulgarian companies and their nominal shares registered with the Commercial Register shall be automatically converted from BGN to EUR. Within 12 months as of the Conversion Date, Bulgarian companies shall make the necessary changes in their corporate governance documents to reflect the new currency conversion and shall publish the updated versions with the Commercial Register.
- All past due public liabilities shall be converted in EUR on the Conversion Date.
- LEI provides for specific rules on or tax, finance and salary documents, showing which of them and when need to be stated in BGN and/or EUR.
- LEI also provides for some special rules for currency conversion applicable to specific types of instruments, such as debt securities, shares of pension funds and pension social security payments, shares of collective investment undertakings, dematerialized securities, etc.
The team at PwC Bulgaria is closely monitoring the process and is ready to assist you with any questions related to the topic.
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