1. DAC 8
The EU Commission has proposed an amendment_ of Council Directive 2011/16/EU on administrative cooperation in the field of taxation, known as DAC 8, that aims to increase transparency and accountability for crypto-assets (“DAC 8” or the “Proposal”).
DAC 8 follows the OECD's Crypto-Asset Reporting Framework (CARF) and is intended to work in conjunction with the Markets in Crypto-Assets (MiCA) Regulation, which is currently awaiting final approval by the EU Parliament and will regulate crypto asset-service providers operating in the EU. DAC 8 will have a broader scope, as it will also apply to non-EU crypto-asset service providers. If adopted, the rules will need to be implemented by Member States by the end of 2025 and come into effect on 1 January 2026.
The proposed amendments provide for the following:
- Reporting requirements: DAC 8 will apply to both EU-based and non-EU based crypto-asset service providers and require them to report information on transactions (exchanges and transfers) involving crypto-assets made by their EU-based users. Non-EU crypto-asset operators will have to register in a Member State of their choice and report in that Member State, unless an agreement on similar reporting and information exchange has been implemented with a competent authority of a Member State.
- Due diligence procedures: DAC 8 requires crypto-asset service providers to perform due diligence on reportable users, which are individuals or entities that are customers of the crypto-asset service provider and carry out reportable transactions. These users must be resident in a Member State and cannot be active entities or excluded persons (e.g. government entities, international organisations, central banks, financial institutions). Crypto-asset service providers must collect self-certification and relevant documentation from their customers to determine if they are “reportable persons” subject to reporting requirements, including for pre-existing relationships within 12 months of DAC 8 coming into effect.
- Specific penalties: Member States will have to enforce DAC 8 rules against crypto-asset operators within their jurisdiction through effective measures (the choice of which is left to the discretion of each Member State). If a crypto-asset user does not provide information requested by the reporting crypto-asset service provider after two reminders (but not before 60 days), the reporting crypto-asset service provider must prevent the user from performing exchange transactions.
- Timeframe: Relevant crypto-asset service providers are expected to report information by 31 January of the year following the relevant calendar year (or other appropriate reporting period) to which the information relates, starting as from 1 January 2026. The automatic exchange to competent tax authorities of the Member States is expected to occur within 2 months following the end of the relevant calendar year (or other appropriate reporting period), starting as from 1 January 2027.
2. Tax rulings and high net worth individuals
The Proposal states that tax rulings (advance cross-border rulings and advance pricing arrangements) for high net worth individuals issued, amended, or renewed starting in calendar year 2026 will be automatically shared with other Member States. Individuals with at least €1m in financial or investable wealth or assets under management (excluding their main residence) will be considered high net worth. Tax rulings issued, amended, or renewed between 2020 and 2025 (calendar years) that are still valid on 1 January 2026 will also be shared automatically.
3. CRS modification
As per the Proposal, the definition of financial institutions, including the concept of depositary institutions, will be updated to cover electronic money products and central bank digital currencies for the purpose of the Common Reporting Standard (CRS). The definition of investment entities will also be modified to bring investing or managing reportable crypto-assets within the CRS. Reporting and due diligence requirements for financial institutions will be strengthened under CRS to include inter alia reporting of the role of each controlling person, self-certification forms for each reportable person, joint account information, and any pre-existing or new accounts.
The Proposal includes minimum financial penalties for various reporting requirements (including CRS, country-by-country reporting and DAC 6) in cases of failure to report after two reminders or when the information provided is incomplete, incorrect, or false (amounting to more than 25% of the information that should be reported). Member States must ensure that these penalties include a minimum amount based on the relevant DAC. In addition, Member States must set penalties for false self-certification for CRS and DAC 8.
The Proposal is open for feedback until February 2023. After consultation with the EU Parliament, it will need unanimous approval in the Council of the EU to be adopted. Member States will have until the end of 2025 to implement the new rules, which are expected to take effect on 1 January 2026.
How can we help?
The Tax Law partners and your usual contacts at Arendt & Medernach are at your disposal to further assess and advise on the impact of the EU Commission proposal on your operations.