EU Implements New Cryptocurrency Tax Reporting Standards Under DAC8

Stricter Compliance and Reporting Standards
Expanding the Directive’s Reach
Key Legislative Objectives
Global Focus on Crypto Tax Collection

The European Union (EU) takes a significant step in cryptocurrency regulation, with the Council of the European Union officially adopting the Directive on Administrative Cooperation (DAC8), introducing stringent cryptocurrency tax reporting requirements.

New Era of Crypto Oversight in the EU The DAC8, representing the eighth iteration of the directive, was formally endorsed on Tuesday and is slated to become operative following its publication in the Official Journal of the EU. This new directive aims to empower tax authorities within the EU to oversee and assess cryptocurrency transactions conducted by individuals or entities across member states.

This development follows the December proposal and subsequent May approval by the Council, aligning with the enactment of the Markets in Crypto-Assets (MiCA) regulations. The European Parliament further cemented its stance with 535 votes in favor, 57 against, and 60 abstentions during a plenary session on September 13.

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Stricter Compliance and Reporting Standards

The DAC8 directive, in harmony with the Crypto-Asset Reporting Framework (CARF) and the latest OECD reporting standards amendments, mandates that crypto asset service providers (CASPs) gather detailed information on all crypto transfers, regardless of their value. This is part of a concerted effort to trace transactions and pinpoint any suspicious activities, bolstering the EU’s Anti-Money Laundering and Countering Terrorism Financing (AML/CFT) regulations. Furthermore, the directive advocates for the establishment of a dedicated European AML entity.

In a press release, the Council emphasized that the newly ratified amendments primarily focus on “the reporting and automatic exchange of information on revenues from transactions in crypto-assets and on advance tax rulings for the wealthiest individuals.”

Expanding the Directive’s Reach

The directive’s enlargement means additional asset and income categories, like crypto-assets, fall under its purview, necessitating a compulsory automatic information exchange among tax authorities, provided by reporting CASPs.

Recognizing the challenges posed by the decentralized nature of cryptocurrencies and their cross-border character, the Council underscored the need for robust international administrative cooperation to ensure effective tax collection.

The directive encompasses an extensive range of crypto-assets, including those distributed via decentralized networks, various stablecoins, e-money tokens, and specific non-fungible tokens (NFTs).

Key Legislative Objectives

The primary goals of DAC8 include broadening the automatic information exchange within the DAC to include data reported by crypto-asset service providers regarding crypto-asset and e-money transactions. It also seeks to expand the current regulations concerning the exchange of tax-relevant information to minimize risks related to tax evasion, avoidance, and fraud.

With unanimous approval from member states in the Council, the directive is set for publication in the Official Journal and will come into force twenty days post-publication.

Global Focus on Crypto Tax Collection

This move by the EU is part of a larger global trend focusing on crypto-asset transaction taxation. For instance, the U.S. Senate recently urged the Treasury Department and the Internal Revenue Service to expedite the implementation of tax reporting requirements for crypto brokers. However, under current stipulations, these new reporting requirements won’t be applied until 2026 for transactions executed in 2025.