New transparency rules will require service providers to report crypto-asset transactions
On 8 December 2022, the European Commission published its proposal for an eighth amendment to the Council Directive 2011/16/EU on administrative cooperation ("DAC8"), which aims to prevent tax fraud, tax evasion, and tax avoidance in the EU, and to strengthen administrative cooperation and exchange of information on tax matters.
The European Commission proposed new tax transparency rules for all service providers facilitating transactions in crypto-assets for customers resident in the European Union. The proposal puts forward changes to existing provisions on exchanges of information and administrative cooperation. It also extends the scope of the automatic exchange of information with respect to information reported by reporting crypto-asset service providers.
Reportable transactions are exchange transactions and transfers of reportable crypto-assets. Both, domestic and cross-border transactions are in the scope of the proposal.
A crypto-asset user is an individual or entity that is a customer of a reporting crypto-asset service provider for the purposes of carrying out reportable transactions. An individual or entity, other than a financial institution or a reporting crypto-asset service provider, acting as a crypto-asset user for the benefit or account of another individual or entity as agent, custodian, nominee, signatory, investment adviser, or intermediary, is not treated as a crypto-asset user, and such other individual or entity is treated as the crypto-asset user.
Due diligence procedures
A reporting crypto-asset service provider shall carry out due diligence procedures in order to identify reportable users. The due diligence procedures apply to individual crypto-asset users as well as entity crypto-asset users to be identified as reportable users.
Automatic exchange of information between competent authorities
Information reported by a reporting crypto-asset service provider has to be communicated to the competent tax authorities where the reporting crypto-asset service provider is resident for tax purposes within 2 months following the end of the calendar year to which the reporting requirements applicable to reporting crypto-asset service providers relate.
DAC8 does not provide for a minimum penalty. However, it states that “the penalties and other compliance measures provided for in the Directive are to be effective, proportionate and dissuasive.”
Entry into force
DAC8 will need to be implemented by Member States by the end of 2025 and will come into effect on 1 January 2026.