The European Council has given its approval to updated regulations that expand tax reporting obligations to encompass transfers of crypto assets. This development comes in the form of the eighth version of the Directive on Administrative Cooperation (DAC), a framework for automatic exchange of information among European governments for tax purposes.
DAC8, proposed in December and officially approved on May 16, aligns with the Crypto-Asset Reporting Framework (CARF) and the revised reporting standards outlined by the Organisation for Economic Cooperation and Development (OECD) in October, as mandated by the G20.
Under DAC8, crypto asset service providers (CASPs) are required to gather information on all crypto asset transfers, regardless of the amount, to ensure traceability and identify suspicious transactions. The directive strengthens the European Union’s rules on Anti-Money Laundering and Countering Terrorism Financing (AML/CFT) and proposes the establishment of a new European AML authority. CASPs must:
“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 regulation emphasizes that this information should be submitted securely and in advance of, or simultaneously with, the transfer of crypto assets.
Additionally, DAC8 introduces new reporting obligations for CASPs concerning high-income individuals and imposes stricter requirements for the communication of Tax Identification Numbers.
Swedish Finance Minister Elisabeth Svantesson commented:
“Today’s decision is bad news for those who have misused crypto assets for illegal activities, evading EU sanctions, or financing terrorism and war. Such activities will no longer be possible in Europe without consequences.”
Changes to the DAC are not implemented through legislation but rather through a consultation process involving the member states of the European Council.