Accounting for Cryptocurrencies in Bulgaria: Tax and Accounting Rules for Companies
Introduction: The Entrance of Crypto Assets into Corporate Treasuries
Digital assets and blockchain technologies have evolved far beyond speculative individual investments. Today, numerous companies in Bulgaria and globally include cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and stablecoins (USDT, USDC) on their balance sheets. Businesses leverage virtual currencies to diversify cash reserves, execute international B2B payments, and accept global client payments with low fees and minimal delays.
However, despite the active integration of cryptocurrencies in the business world, accounting frameworks in Bulgaria (the Accounting Act, NAS, and IFRS) do not yet contain a dedicated standard for virtual currencies. This leads to administrative complexities and tax exposure. How should virtual assets be classified on the balance sheet? How do we record acquisitions, sales, and barter transactions? What is the CIT and VAT treatment? In this in-depth guide, we analyze the current accounting and tax frameworks for crypto assets in Bulgaria.
1. Accounting Classification of Cryptocurrencies Under IFRS and NAS
Due to the absence of a dedicated accounting standard, virtual currencies are classified by applying general accounting principles and guidelines from the International Financial Reporting Interpretations Committee (IFRIC). Because virtual currencies are not backed by a central bank and are not legal tender, they CANNOT be classified as cash or cash equivalents.
Depending on the business model and the company’s objective, crypto holdings are classified under one of two frameworks:
- As Intangible Assets: Governed by IAS 38 (Intangible Assets) or NAS 21 (Intangible Assets). This is the default classification for companies holding cryptocurrencies long-term for capital appreciation. The assets are recorded at cost, are not depreciated (having an indefinite useful life), and undergo annual impairment testing at the end of each financial year.
- As Inventory (Goods): Governed by IAS 2 (Inventories) or NAS 2 (Inventories). This applies to entities whose primary business is buying and selling virtual currencies (crypto brokers, active trading companies). Here, virtual currencies are treated as inventory held for sale in the ordinary course of business, valued at the lower of cost and net realizable value.
2. Double-Entry Bookkeeping and Transaction Records
Reflecting crypto operations requires setting up specialized ledger accounts to track balances across wallets and exchanges. The core operations are recorded as follows:
A. Buying Cryptocurrency with Fiat Money (EUR, USD)
At acquisition, the asset is recorded at its purchase price, including transaction fees:
Debit Account 219 (Other Intangible Assets) or Account 304 (Goods) / Credit Account 503 (Cash at Bank)
B. Selling Cryptocurrency for Fiat Money
At sale, the company records the operating income and writes off the carrying value of the asset:
Debit Account 503 (Cash at Bank) / Credit Account 709 (Other Operating Income)
And simultaneously, the cost write-off is recorded:
Debit Account 709 (Other Operating Income) / Credit Account 219 (Other Intangible Assets) or 304 (Goods)
C. Crypto-to-Crypto Exchanges
Exchanging one cryptocurrency for another (e.g., BTC to ETH) is common. Under Bulgarian tax and accounting rules, crypto-to-crypto exchange is treated as a barter transaction. It represents the disposal of one asset and the acquisition of another. Every exchange triggers a taxable event (gain or loss) that must be valued in EUR based on market rates at the transaction time.
3. Year-End Revaluation and Impairment
At the end of the financial year, companies must reflect changes in the value of their holdings. If the cost model under IAS 38 is used, any drop in the market price below the carrying value must be written off as an impairment loss in the profit and loss statement:
Debit Account 699 (Other Extraordinary Expenses) / Credit Account 219 (Other Intangible Assets)
If the market value increases above the cost, no gain is recognized in the P&L unless the company has adopted the revaluation model (where gains are directed to a revaluation surplus in equity). This requires careful planning when designing the company’s accounting policy.
4. Corporate Income Tax (CIT) on Crypto Gains
Corporate profits from virtual currency operations are subject to standard corporate income tax in Bulgaria at a flat 10% rate. The taxable result is calculated based on realized gains and losses during the fiscal year. Key aspects include:
- Taxable events occur only upon realization—either by selling for fiat or swapping for other assets. Unrealized gains from market appreciation are not taxed.
- Realized losses from crypto transactions are tax-deductible and offset the company’s taxable profits for the year.
- To determine the cost of sold portions of assets, companies must use either FIFO (First-In, First-Out) or the weighted average cost method.
5. VAT Treatment: The ECJ Hedqvist Decision
The VAT treatment of virtual currencies follows European Court of Justice rulings. In the landmark case C-264/14 (Hedqvist), the ECJ ruled that transactions involving the exchange of traditional currencies for virtual currencies constitute services that are exempt from VAT under Article 135(1)(e) of the VAT Directive.
Therefore:
- Bulgarian companies do not charge VAT when selling or exchanging cryptocurrencies.
- Although exempt, these transactions impact the company’s right to input VAT deductions on general overhead costs, requiring the calculation of a partial tax credit coefficient under Article 73 of the Bulgarian VAT Act.
6. AML Compliance and MiCA Regulations in 2026
For security and anti-money laundering purposes, strict regulations apply. Businesses offering virtual currency exchange or custody services must register with the NRA’s public registry before starting operations and adopt internal policies in compliance with the Measures Against Money Laundering Act (MAMLA).
Furthermore, in 2026, the European Union’s MiCA (Markets in Crypto-Assets) regulation is in full effect. MiCA provides a harmonized regulatory framework for crypto issuers and service providers in the EU, boosting corporate legal security.
7. Frequently Asked Questions (FAQ)
Q1: Is tax due if we hold Bitcoin in a hardware wallet and its value doubles during the year?
No. As long as the asset is not sold or swapped, no taxable event occurs. Unrealized gains from market changes are not taxable.
Q2: How is cryptocurrency mining accounted for?
Mining is treated as a production activity. Mined coins are recorded as inventory at cost, which includes electricity, hardware depreciation, rent, and technical payroll.
Q3: Can a company pay salaries to its employees in cryptocurrency?
No. The Bulgarian Labor Code requires salaries to be paid in the official currency (EUR). Paying payroll in crypto is illegal. However, you can pay B2B independent contractors or consultants in crypto if agreed in the contract.
Q4: Which documents are needed to prove the cost of cryptocurrency during a tax audit?
You must maintain bank statements showing fiat transfers, exchange statements (transaction history) with timestamps, quantities, and prices, and accounting records showing EUR conversion rates.
Q5: How do we account for client payments received in crypto for goods or services?
The sale is recorded at the market value of the goods/services. VAT is calculated on the EUR value. The acquired crypto asset is recorded at the market rate at the transaction time.
Q6: What does a year-end impairment test involve?
It compares the carrying value of the asset with its market value on December 31st. If the market value is lower, the difference is written off as an expense in the P&L.
Q7: Are there cash payment limits for crypto transactions?
Yes. In Bulgaria, cash payments are capped at EUR 5,112.92. Swapping crypto for cash above this limit with individuals must be processed via banks.
Q8: How are stablecoins (USDT, USDC) classified?
Although pegged to the USD, stablecoins are classified as crypto assets (intangible assets or inventory) rather than cash because they are not central bank-issued currencies.
Conclusion
Accounting for virtual currencies requires combining traditional accounting knowledge with an understanding of blockchain technology, wallet histories, and exchange files. Incorrect classifications can lead to tax adjustments and fines. Our accounting firm has a dedicated team specializing in digital assets. Contact us today to ensure tax compliance for your business.