DAC 8: a new chapter in EU tax transparency

Background

Automatic exchange of information on financial accounts has been put in place within the European Union through the Directive 2014/107/EU (“DAC2”) amending Directive 2011/16/EU on administrative cooperation and implementing the Common Reporting Standard (“CRS”). 

The purpose of the CRS is to detect and discourage tax evasion through a multilateral network of tax cooperation among national tax authorities.

In addition to extending the scope of the CRS, DAC 8 extends the scope of automatic exchange of information under DAC to information that will be reported by crypto-asset service providers and operators on transactions (transfer or exchange) of crypto-assets.

It will thus contribute to the fight against tax evasion by closing potential loopholes resulting from recent evolutions in finance and to create a level playing field for all types of assets as well as for all new and emerging financial service providers.

Understanding DAC 8

Service providers and operators providing crypto-assets services will be required to carry out due diligence procedures and report information on exchanges and transfers of crypto-assets in scope carried out by individuals or entities crypto-assets users, resident in a Member State.

The information is to be reported annually by Reporting service providers and operators to the relevant Member State’s competent authorities in the calendar year following the year to which the information relates.

These provisions should apply as from 1 January 2026.

Member States will be required to exchange the relevant information with the concerned Member States within nine months following the end of the calendar year to which the reporting requirements applicable to reporting crypto-asset service providers relate.

Effects on cross-border investments using crypto-assets

DAC 8 will ensure greater tax transparency as regards cross-border investments using crypto-assets.

DAC 8 has an extraterritorial scope as it requires non-EU crypto-assets operators that provide crypto-assets services to EU resident to register with an EU Member State and to comply with due diligence and reporting requirements of that Member State.

By introducing reporting and transparency rules, DAC 8 should increase the legitimacy and acceptance of crypto-assets within the European Union.

It should thus help to strengthen the confidence of all players in crypto-assets and contribute to their development.

Potential challenges

Some concepts are broadly defined within the Directive and may be interpreted differently by Member States.

A fragmented implementation of DAC 8 across the European Union would undermine the effectiveness of DAC8 and the objective of establishing a consistent regulatory framework across the EU.

The ABBL remains fully committed to tax transparency and will assist its members in the implementation of DAC 8 by helping them to fully understand the applicable rules.