How has EU crypto tax transparency progressed since DAC8 was approved half a year ago?
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How has EU crypto tax transparency progressed since DAC8 was approved half a year ago?
DAC8 is a consensus reached among EU member states to build a more comprehensive and transparent tax system.
Navigating Web3 tides with focused insightsAuthor: TaxDAO
To adapt to the evolving financial landscape, in December 2022, the European Commission proposed establishing a reporting framework requiring crypto-asset service providers to report transactions of EU clients. In May 2023, EU finance ministers reached a political agreement, and in October 2023, EU member states formally adopted Directive 2011/16/EU on administrative cooperation in the field of taxation—known as DAC8—introducing comprehensive tax transparency rules for crypto-assets and expanding cooperation among national tax authorities.
Under the directive, EU member states must transpose the main provisions of DAC8 into national law by December 31, 2025, with new rules applying from January 1, 2026. However, two exceptions exist: provisions related to identification services must be transposed by January 1, 2024, and applied from January 1, 2025; those concerning TIN (Taxpayer Identification Number) verification must be transposed by December 31, 2027, and applied from January 1, 2028.
Key Provisions of DAC8
DAC8 mandates cryptocurrency companies to report information on customer holdings, enabling tax authorities to share data on individuals' crypto holdings. This means all crypto-asset service providers based in the EU—regardless of size—must report transactions of clients residing in the EU. The amendment primarily concerns the reporting and automatic exchange of information on certain income from crypto-asset trading, as well as advance tax rulings for high-net-worth individuals. The directive strengthens the existing legislative framework by expanding the scope of registration and reporting obligations and improving overall administrative cooperation among tax authorities, aiming to deter the use of cryptocurrencies to hide assets offshore and enhance EU member states’ ability to detect and combat tax fraud, avoidance, and evasion.
Latest Developments on DAC8
A few EU countries have already begun domestic implementation of DAC8. Reports indicate that Spain's Ministry of Finance is reforming the General Tax Law to allow the Spanish Tax Agency to identify and seize crypto assets held by taxpayers with overdue tax liabilities. Spanish residents holding any crypto assets on non-Spanish platforms must declare them to tax authorities by the end of next month, though only individuals whose balance sheets exceed €50,000 (approximately $54,000) in crypto assets are required to report foreign-held assets. On March 25, 2024, the Czech Republic’s government announced a draft bill amending its International Tax Cooperation and other relevant laws, advancing the domestic adoption of DAC8. The bill requires crypto-asset service providers to automatically exchange information on crypto-asset transactions, including digital service providers’ advance tax rulings for high-net-worth individuals under DAC8. On March 21, 2024, Slovakia’s Ministry of Finance launched a public consultation on DAC8, initiating its incorporation into national law. However, so far, very few countries have fully implemented the legislation. Before full enactment, crypto institutions still have time to conduct internal reforms to comply with DAC8 requirements, while investors must also prepare for its impact.
How Does DAC8 Relate to Crypto Assets?
DAC8 expands the scope of automatic information exchange to include crypto assets and electronic money, applying to financial institutions involved in e-money and central bank digital currencies (CBDCs). Crypto-asset service providers must annually collect information and report to tax authorities of the member state where they reside, are authorized, or registered. Reports must include information about the crypto-asset provider itself, reportable users, and their crypto-asset transactions. Tax authorities will then share this reported information via the EU’s common communication network with the tax authorities of the user’s country of residence.
By revising the definitions of “depository institution” and “depository account,” DAC8 incorporates electronic money into the Common Reporting Standard (CRS) framework, bringing entities holding e-money products or central bank digital currencies within the scope of CRS-reporting financial institutions.
DAC8 expands the range of information that must be reported. Reporting requirements under DAC2/CRS have been broadened to include reporting on the reporter’s role as a controlling person or equity holder, obliging financial institutions to collect or assess relevant client information. Additionally, newly classified financial institutions will be required to collect and review their clients’ self-certifications from the date of change effectiveness: ① whether an account is a joint account, including the number of joint account holders; ② account type; ③ whether the account is a pre-existing or new account.
DAC8 also introduces information exchange regarding cross-border advance tax rulings issued, modified, or renewed after January 1, 2026, for high-net-worth individuals (individuals whose covered transactions exceed €1.5 million). Competent authorities of member states shall automatically exchange information on the following categories of cross-border advance rulings issued, modified, or renewed after January 1, 2026:
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Advance cross-border rulings on transactions or series of transactions exceeding €1.5 million, where the amount is mentioned in the ruling and involves one or more natural persons’ tax matters.
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Advance cross-border rulings determining the tax residency of a natural person in a member state.
DAC8 extends the scope of current rules on tax-related information exchange, including provisions for the automatic exchange of information on unhosted dividends and similar income, supplementing existing DAC regulations. It also expands DAC’s applicability to value-added tax, other indirect taxes, customs duties, anti-money laundering measures, and efforts to combat terrorist financing. Furthermore, DAC8 proposes the possibility of using exchanged information for purposes beyond those permitted by member states. Member states should send information covered by acts under Article 215 of the Treaty on the Functioning of the European Union and share it with competent authorities responsible for restrictive measures to prevent sanctions violations.
DAC8 enhances TIN reporting and communication. The Commission will provide tools enabling member states to automatically electronically verify taxpayer identification numbers provided by reporting entities or taxpayers, facilitating automatic information exchange. Meanwhile, member states will strive to ensure reporting entities can obtain electronic confirmation of the validity of taxpayer identification codes within the scope of DAC1, DAC2, DAC3, DAC4, DAC6, DAC7, and DAC8.
DAC8 represents a consensus among EU nations to build a more comprehensive and transparent tax system, marking a significant step forward in regulating the rapidly developing cryptocurrency sector. While full implementation will take time, as countries progressively adopt DAC8 into national law, it will eventually be formally applied in crypto regulatory practice.
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