European Council Adopts DAC8 Directive to Regulate Taxation of Crypto-assets

On October 17, the European Council adopted the Directive 2011/16/EU on administrative cooperation in the area of taxation regarding the reporting and automatic exchange of information on revenues from transactions in crypto-assets and on advance tax rulings for the wealthiest (high-net-worth) individuals. The original legislative proposal was submitted back in 2022.

The aim of the Directive is to strengthen the existing legislative framework by enlarging the scope for registration and reporting obligations of relevant persons and overall cooperation of tax administrations.

The updated document now covers additional categories of assets and income – crypto-assets. It stipulates for a mandatory automatic exchange between tax authorities of information which will have to be provided by reporting crypto-asset service providers. The decentralized nature of crypto-assets has made it difficult for member states’ tax administrations to ensure tax compliance, so cross-border administration of the sphere has been in demand for a long period of time.

The Directive covers a broad scope of crypto-assets, based on the “Markets in crypto-assets” regulation (MiCA), introduced in May 2023. Crypto-assets that have been issued in a decentralized manner, stablecoins, e-money tokens, certain non-fungible tokens (NFTs), central bank digital currencies are included in the scope of regulation.

Key Points of the Directive

The purpose of the Directive is to strengthen the existing legislative framework by enlarging the scope for registration and reporting obligations of crypto-asset providers under the conditions of strengthening digitalization of the economy.

Updated DAC8 aims to:

– extend the scope of automatic exchange of information under DAC to information that will have to be reported by crypto-asset service providers on transactions (transfer or exchange) of crypto-assets and e-money;

– extend the scope of the current rules on exchange of tax-relevant information by including provisions on exchange of advance cross-border rulings concerning high-net-worth individuals, as well as provisions on 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;

– amend a number of other existing provisions of DAC: reporting and communication of the Tax Identification Number (TIN) in order to facilitate the task of tax authorities of identifying taxpayers and corresponding taxes to be paid; improving DAC provisions on penalties applied by member states to persons for the failure of compliance with national legislation on reporting requirements provided by DAC8.

Information to Be Reported

Reporting entities (“crypto-asset service providers”, “crypto-asset operators”) will provide the following information under DAC8’s reporting requirements:

1) Reportable crypto-asset service provider’s data:

• Name

• Address

• TIN

• Identification number and global legal entity identifier (if any)

2) Reportable user (individual)’s data:

• Name

• Address

• TIN

• Member State of residence

• Date and place of birth

3) Reportable crypto-assets data:

• Full names of the crypto-assets and their type

• Amounts paid or received from exchanging crypto-assets for fiat currency, number of such transactions, number of units transacted

• Value of the crypto-asset (at acquisition) and the gross proceeds (upon disposal), in case of crypto-to-crypto transactions, number of such transactions, number of units transacted

• Retail payment transactions

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

High-net-worth Individuals

The update separately includes requirements for high-net-worth individuals (whose financial or investable wealth or assets – excluding their private residence – reaches above € 1 million). Member States will exchange with the other Member States any advance cross-border ruling issued to such individuals, which were either issued, amended or renewed after January 1, 2020 and which are still valid on January 1, 2026.

EU Central Directory

Information on crypto-asset operators, users and transactions will be stored in an EU-wide Central Directory. The Commission plans to present the corresponding electronic system by the end of 2026. It will be primarily accessible by Member State authorities to expand the automatic exchange of information under DAC8.

Next Steps

The Directive will be published in the Official Journal and enter into force 20 days after its publication.

Council Directive Amending Directive 2011/16/EU on Administrative Cooperation in the Field of Taxation 

Briefing on tax transparency rules for crypto-asset transactions (DAC8)

Read more:

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