The European Parliament has given its approval to DAC8, a measure that will establish tax reporting requirements for cryptocurrency transactions across the European Union (EU). With a significant majority vote in favor of 535, 57 against, and 60 abstentions, the proposed rule has overcome its final legislative hurdle and is now on track to become law.
Once implemented, DAC8 will require crypto-asset service providers to report any transactions involving EU clients to the tax authorities within the EU. This move aims to introduce an automatic exchange of information on crypto assets between tax authorities in EU countries. The European Commission estimates that this new reporting framework could generate additional tax revenue between €1 and €2.4 billion annually, according to an impact assessment report by the European Parliamentary Research Service (EPRS).
The EPRS report provides detailed information on the DAC8 directive, which closely aligns with the provisions of the OECD’s Common Reporting Standard (CRS). The directive outlines two types of entities that will be required to report information to local authorities: crypto-asset providers, who offer crypto-asset services to third parties, and crypto-asset operators, who provide services other than those of a crypto-asset provider.
These entities, known as reportable crypto-asset service providers (RCASPs), will be subject to the reporting requirements of DAC8 if they have reportable users within the EU, regardless of their size or residence. The directive encompasses all crypto assets that can be utilized for investment and payment purposes, including e-money, e-money tokens, and central bank digital currencies (CBDCs). Reportable transactions by RCASPs will include any exchange transactions and transfers of reportable crypto-assets, including transactions between reportable crypto-assets and fiat currencies, as well as transactions exclusively between reportable crypto-assets.
According to the EPRS report, the reporting arrangements mandated by DAC8 are anticipated to commence by January 1, 2026. This provides an ample timeline for the implementation of the Markets in Crypto-Assets (MiCA) regulation before the reporting requirements become effective. MiCA is a forthcoming regulatory framework that aims to establish a comprehensive regulatory regime for crypto-assets within the EU, covering a wide range of activities such as issuance, trading, and custody.
The approval of DAC8 by the European Parliament signifies a significant step in regulating cryptocurrency transactions across the EU. The establishment of tax reporting requirements for crypto-asset service providers seeks to increase transparency and combat potential tax evasion within the crypto industry. As the implementation of DAC8 approaches, market participants and authorities need to prepare for compliance with the new reporting framework. Moreover, the subsequent introduction of the MiCA regulation will further contribute to the creation of a comprehensive regulatory environment for crypto-assets in the European Union.