Accounting Transition to the Euro: A Business Guide

On January 1, 2026, Bulgaria will officially adopt the euro as its national currency. This historic event introduces a new framework not only for consumers and commerce but also for the overall accounting, contractual, and legal environment. The change will be significant for all legal entities and individuals engaged in economic activity – including companies, freelancers, and self-employed persons.

In this article, we’ll explore the real effects of the euro adoption on accounting practices, what the transition involves, what actions are required from businesses, and how to prepare while minimizing the risk of errors or penalties.

The Euro Is Coming: What It Means for Accounting

The introduction of the euro means that all accounting records, reports, tax returns, contracts, and even receipts will shift from BGN (Bulgarian lev) to EUR (euro). As of January 1, 2026, the euro becomes the accounting and reporting currency for all enterprises and self-employed professionals in Bulgaria.

According to the National Euro Adoption Plan and the methodological guidelines issued by the Ministry of Finance, the transition will be carried out using a fixed exchange rate of 1 EUR = 1.95583 BGN. All balances at the end of 2025 will be automatically converted, and rounding will follow strict rules – to the second decimal place, using the third digit to determine rounding.

📘 Rounding Guidelines for Conversion at the Fixed Exchange Rate

Official rate: 1 EUR = 1.95583 BGN

All BGN values are converted using this rate, regardless of source.

Rounding rules:

• Final values are rounded to two decimal places.

• If the third digit is 5 or higher, the second digit is rounded up by one.

• All converted values must be recorded in an internal transition protocol.

The Accounting Transition: From Theory to Practice

The biggest challenge is not the currency change itself, but the technical and organizational preparation of accounting teams, systems, and processes. By the end of 2025, companies must review their accounting software, ensure it supports dual-currency operations, and prepare a plan for balance conversion. All interim and annual financial reports for 2025 will be submitted in BGN, while reports for 2026 will begin with opening balances in EUR, calculated from the closing balance of the previous year.

Each company must clearly document this transition using an internal protocol, which includes opening balances, conversion rate, and applied accounting principles. The use of Accounting Standard 21 (AS 21) or IAS 21 (International Accounting Standard) is mandatory for accurate reporting of the currency change.

Contracts, Amendments, and Documentation: What Needs Updating?

Although existing contracts remain valid, all monetary values within them will be treated as euro amounts starting January 1, 2026. This change occurs automatically, but best practice requires clarity and written confirmation. Employers should prepare annexes to employment contracts reflecting the new euro-based salaries. The same applies to lease agreements, consultancy contracts, leasing, and credit contracts—any contract where monetary amounts are stated in BGN must clearly show the converted euro value.

Accounting documents such as invoices, payment slips, and receipts must also be updated. Fiscal devices will require software updates to reflect the currency switch.

Year-End Closing and Transitional Reports

2025 will be the last fiscal year fully reported in BGN. Year-end closing will take place on December 31, after which balances will be converted to EUR using the fixed exchange rate. From 2026 onward, all accounting will be in euros, but with a special note about opening balances based on the previous currency.

There are no expected tax effects from the currency conversion itself, but accountants should be cautious with foreign exchange differences resulting from other currency operations during the year. The transition must be described in the notes to the annual report and in the IFRS disclosures if applicable.

Accounting for Revenue Due in 2025 but Paid in 2026

The euro transition raises questions about recognizing receivables and payments that fall across two fiscal years and two currencies. One common scenario:

📘 Example:

✅ Accounting treatment:

1. As of December 31, 2025 (in BGN):

The invoice is overdue, so the amount is recognized as revenue for 2025, even though payment has not been received.

2. On January 1, 2026 – at currency transition:

The balance in Account 411 “Receivables from customers” (1,000.00 BGN) is converted to EUR:

1,000.00 BGN / 1.95583 = 511.29 EUR

3. On January 5, 2026 – upon receiving payment:

• If the client pays in euros:

Dr 503 Bank account – 511.29 EUR

Cr 411 Clients – 511.29 EUR

• If the client attempts a BGN transfer: This will not be possible, as all bank accounts will have been converted to EUR and BGN transfers will no longer be accepted.

• If the client (as a private individual) pays in cash in BGN, the payment will be accepted and automatically converted at the official fixed rate. From an accounting perspective, the company will receive an amount in EUR, which is treated as the actual payment. Even if payment is made in BGN, it is fully recorded in EUR; any minor discrepancies are treated as foreign exchange differences.

Tax-Related Questions

According to the Ministry of Finance, VAT and all other tax obligations after January 1, 2026, will be calculated in euros. All tax returns and declarations will be submitted in EUR.

The National Revenue Agency’s (NRA) software systems will be updated accordingly, but companies are advised to test their file-generation processes before the end of 2025.

What Every Business Must Do in 2025

Regardless of size, every business must start preparing for the euro transition in 2025. It’s not only about technical adjustments, but also about training staff, updating documents, creating internal communication, and developing new pricing strategies.

Businesses serving customers must display dual pricing (BGN and EUR) for at least one month prior to euro adoption. This creates a real need for fast action starting in early 2025.

📅 Accounting Calendar: Key Milestones for 2025–2026

Conclusion

The euro will bring greater transparency, financial stability, and ease of doing international business. But to ensure a smooth transition, accounting systems must be well-prepared.

If you are a business owner or freelancer, now is the time to audit your readiness.

Author

Деси / Desi

is an accountant with over 10 years of experience, specializing in working with freelancers and small businesses. Based in Varna, she combines her professional expertise with a passion for making accounting accessible and easy to understand for everyone.

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