New proposal to amend EU directive on administrative cooperation in the field of taxation (DAC 8)

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The amendment proposes new reporting requirements for service providers and operators involved in transactions with crypto-assets and EU resident customers. It also contains an expansion of the exchange of information on tax rulings to include high net worth individuals, and introduces minimum financial penalties and a CRS modification.

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:

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.

4. Penalties

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.

Next steps

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.

Download the press release

Luxembourg Newsflash – New proposal to amend EU directive on administrative cooperation in the field of taxation (DAC 8)

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