European Council Agrees on Stronger Control over Crypto-assets within Tax Information Automatic Exchange

On May 16, the Economic and Financial Affairs Council agreed on a new Council Directive amending Directive 2011/16/EU on Administrative Cooperation in the Field of Taxation for the Introduction of New Transparency Rules Concerning Crypto-asset Transaction Reporting (DAC8 Directive).

Objective of the DAC8 Update

The amendments introduce certain changes in the crypto-asset field for the wealthiest (high-net-worth) individuals by enlarging the scope for registration and reporting obligations and overall administrative cooperation of tax administrations.

Crypto-asset service providers will now have to cooperate with tax authorities and provide them with relevant reporting information. Earlier, the decentralized nature of crypto-assets made it difficult for member states’ tax administrations to ensure tax compliance, so amendments to DAC8 are expected to assist in tax collection.

Crypto-assets Covered

MiCA (“Markets in Crypto-assets”) Regulation sets out the list of crypto-assets, which will also be covered by the updated DAC8. It is worth noting that those crypto-assets that have been issued in a decentralized manner, as well as stablecoins, including e-money tokens and certain non-fungible tokens (NFTs), are included in the reviewed Directive.

Background

In December 2022, the Commission presented a proposal for a Council directive amending Directive 2011/16/EU on Administrative Cooperation in the Field of Taxation (DAC8). The proposal aims to extend the scope of automatic exchange of information to information that will have to be reported by crypto-asset service providers on transactions (transfer or exchange) of crypto-assets and e-money within the framework of economy digitalization.

The provisions of DAC8 on due diligence procedures, reporting requirements and other rules applicable to reporting crypto-asset service providers the follow Crypto-Asset Reporting Framework (CARF) and amendments to the Common Reporting Standard (CRS), prepared by the OECD.

Current provisions on exchange of tax information, in particular, extend cross-border rulings concerning high-net-worth individuals, and regulate automatic exchange of information on non-custodial dividends and similar revenues, in order to reduce the risks of tax evasion, tax avoidance and tax fraud.

Press release

Draft European Council Directive amending Directive 2011/16/EU on Administrative Cooperation in the Field of Taxation

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European Parliament Approves Crypto-assets Legislation