The European Council has approved updated rules that extend tax reporting requirements to include transfers of crypto assets. This is the eighth version of the Directive on Administrative Cooperation (DAC), which is a set of procedures for automatic information sharing between European governments for tax purposes.
DAC8 was proposed in December and approved May 16 after the passage of Markets in Crypto-Assets (MiCA), since it depends on definitions established in that legislation. The new DAC adheres to the Crypto-Asset Reporting Framework (CARF) and amendments to reporting standards published by the Organisation for Economic Cooperation and Development (OECD) in October under a G20 mandate.
DAC8 requires crypto asset service providers (CASPs) to collect information on crypto asset transfers of any amount to ensure traceability and identify suspicious transactions. It strengthens the European Union’s Anti-Money Laundering and Countering Terrorism Financing (AML/CFT) rules and proposes the creation of a new European AML body. The proposed regulation requires that CASPs:
“Ensure that transfers of crypto-assets are accompanied by the name of the beneficiary, the beneficiary’s distributed ledger address, in cases where a transfer of crypto-assets is registered on a network using DLT or similar technology, [and] the beneficiary’s account number, in cases where such an account exists.”
The proposed regulation further explains: “The information should be submitted in a secure manner and in advance of, or simultaneously or concurrently with, the transfer of crypto-assets.”
In addition to the new requirements for CASPs, DAC8 includes new reporting rules relating to high-income individuals and tougher requirements for communicating Tax Identification Numbers.
We welcome the political agreement reached by EU Finance Ministers today on new tax transparency rules on the crypto-asset sector.
The Directive will improve EU countries’ ability to detect and counter tax fraud, tax evasion and tax avoidance.
More info ↓
— European Commission (@EU_Commission) May 16, 2023
Swedish Finance Minister Elisabeth Svantesson said in a statement:
“Today’s decision is bad news for those who have misused crypto-assets for their illegal activities, to circumvent EU sanctions or to finance terrorism and war. Doing so will no longer be possible in Europe without exposure.”
Changes to the DAC are not made through legislation, but through a consultation process among the member states of the European Council.