EU Directive “DAC” Amendments, Agreed on the Direction of Strengthening Taxation of Crypto Assets


To strengthen taxation of crypto assets and the richest

The Council of Europe today reached agreement on the overall direction of the proposed amendments to the Directive on Administrative Cooperation in Taxation. The amendment emphasizes the reporting of income information related to crypto assets (virtual currencies), information exchange with tax authorities, and pre-assessment of taxes for individuals with high net worth.

The council has indicated a direction to expand the scope of the current rules for exchanging tax information and strengthen the oversight of income from crypto assets. This will make cryptocurrency service providers obliged to report information about income derived from transactions and automatically share this with tax authorities.

In addition, the proposed amendments to the Directive aim to expand the scope of exchanging information on advance international tax determinations for high net worth individuals.

An advance tax determination is the process by which a tax authority makes a determination based on previously submitted information about a particular tax situation. Here, in order to calculate taxes for specific individuals and companies, details of transactions and activities are submitted in advance by companies that offer cryptocurrency transactions to tax authorities and are automatically shared among tax authorities in each country. shape is assumed.

This will reduce the risk of tax evasion, tax evasion and tax fraud. The current DAC (Administrative Cooperation Directive) excludes this type of income.

Sweden’s Finance Minister Elisabeth Svantesson said:

We seek to reduce the risk of crypto assets becoming safe havens for tax evasion and tax fraud by tightening rules for government cooperation and closing loopholes traditionally used to evade income taxation. This agreement is an example of the EU’s renewed recognition as a leader in the implementation of global standards.

The proposed amendments are broad in scope, covering a wide variety of crypto-assets based on the definitions set out in the Regulations on Regulation of the Market for Crypto-Assets (MiCA). This includes decentralized issued crypto assets, stablecoins, e-money tokens, and some non-fungible tokens (NFTs).

Svantesson also added, “To date, the decentralized nature of cryptoassets has made it difficult for tax authorities in each member state to ensure tax compliance. International administrative cooperation is essential to ensure effective collection.”

What is MiCA

MiCA is a comprehensive crypto-asset regulation proposal for all member states of the European Union (EU) proposed by the European Commission (EC) in September 2020. It aims to promote the institutionalization of the European market, and after its establishment, it will replace the existing virtual currency regulations, which currently have different interpretations in each EU country.

Cryptocurrency Glossary

connection:European Parliament Approves MiCA Regulation, Toward Harmonization of EU-Wide Regulations on Cryptocurrencies

Discussions on DAC8 progress

Since November 2020, the Council of Europe has been working towards updating the rules of administrative cooperation as a concrete measure towards fair and effective taxation, the challenges of digitalisation, and the good governance of taxation both within and outside the EU. have been discussing.

In particular, in December 2022, the European Commission under the Council of Europe submitted a new Directive Amendment Draft called ‘DAC8’. It is currently being debated by the European Parliament and the European Council. Adoption of the Directive is expected by the end of 2023.

DAC8 reflects revisions to the Crypto Asset Reporting Framework (CARF) and Common Reporting Standards (CRS) published by the OECD in October of the same year at the direction of the G20. The G20 viewed the amendments to the CARF and CRS as essential additions to the global standard for automatic exchange of information and gave full approval to them.

Specifically, DAC8 imposes obligations on crypto asset service providers to report information on crypto asset transactions to tax authorities. The information reported includes the identities of the parties to the transaction, the value of the transaction, the date of the transaction, and so on.

In addition, DAC8 requires the exchange of information between tax authorities. There will be an automatic exchange of information about crypto assets, sharing account holder identities, account values, account opening dates, etc.

connection:ECB Executive Board Calls for Tougher Approach to “Bitcoin-Based Assets”

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