The European Commission proposed an amendment to Directive 2011/16/EU on administrative cooperation in the field of taxation on 8 December 2022. The DAC8 proposal changes the existing DAC framework and includes new rules on cross-border rulings for high-net-worth individuals. However, it also introduces a crypto-asset reporting framework for competent EU authorities.
The Crypto-Asset Reporting Framework (CARF) is expected to be enforced on 1 January 2026, and it allows EU member states to receive and exchange information about crypto-asset users. It can achieve this by leveraging due diligence procedures and by enforcing reporting rules for operators that are active in crypto-asset transactions and their users.
When it comes to due diligence, the procedures require that all individuals, as well as legal entity crypto-asset users are identified as ‘reportable users.’ However, Reporting Crypto-Assets Service Providers must employ different due diligence procedures for individuals than for legal entities. For legal entities, some cases might require the identification of controlling persons.
As the Reporting Crypto-Asset Service Providers gather the required information, they must submit it to the relevant competent authority while abiding by the GDPR (General Data Protection Regulation). After the information is received, it can then be transferred to the competent authority of another relevant member state where the reportable user is a tax resident. Under DAC8, reportable transactions are exchange transactions and transfers of reportable crypto assets.
The transferred information will include the reportable user’s legal name, legal address, member state of residency, TIN, and place of birth if we’re talking about an individual.
The European Commission has made it clear that there will be penalties applicable to infringements of national provisions adopted pursuant to DAC8. For instance, in the case of non-compliance with national provisions adopted to comply with DAC8, the minimum pecuniary penalty is set at EUR 50,000.
However, this penalty is scaled on the annual turnover of the relevant taxpayer. This means that the minimum penalty can increase to EUR 150,000 if the revenue exceeds EUR 6 million.
The deadline for member states for publishing and adopting laws, regulations, and administrative provisions necessary to comply with the DAC8 is 31 December 2025, as DAC will come into effect on 1 January 2026.
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