The European Parliament has recently given its approval to DAC8, a measure that aims to introduce tax reporting requirements for cryptocurrency transactions across the European Union (EU). With an overwhelming majority of 535 in favor, 57 against, and 60 abstentions, the proposed rule has successfully passed its final legislative hurdle and is on its way to becoming law.
Once implemented, the DAC8 rule will mandate crypto-asset service providers to report transactions involving EU clients to the tax authorities within the bloc. This move is expected to pave the way for automatic exchange of information on crypto assets among tax authorities in EU countries, potentially increasing tax revenues by an estimated €1 to €2.4 billion annually, according to an impact assessment report by the European Parliamentary Research Service (EPRS).
The DAC8 directive closely aligns with the provisions of the OECD’s Common Reporting Standard (CRS) and incorporates specific requirements for crypto-assets. It outlines two categories of entities that are obligated to report information to local authorities: crypto-asset providers, who offer one or more crypto-asset services to third parties, and crypto-asset operators, who provide crypto-asset services excluding the role of a provider.
Entities falling under the classification of reportable crypto-asset service providers (RCASPs) will be subject to the reporting requirements of the DAC if they have reportable users within the EU, regardless of the size of the RCASP or their place of residence. This means that both large and small-scale cryptocurrency businesses will need to comply with the reporting obligations outlined in the directive.
The directive extends its scope to cover all types of crypto assets that can be utilized for investment and payment purposes. This includes popular cryptocurrencies such as Bitcoin and Ethereum, as well as e-money, e-money tokens, and even central bank digital currencies (CBDCs). Reportable transactions by RCASPs include exchange transactions and transfers involving crypto-assets, including those made with fiat currencies or between different types of crypto-assets.
According to the EPRS report, the reporting arrangements are expected to come into effect by January 1, 2026. This provides sufficient time for the Markets in Crypto-Assets (MiCA) regulation to be established beforehand, ensuring a smooth transition and alignment with existing and forthcoming regulations within the EU.
The approval of DAC8 by the European Parliament marks a significant milestone in the regulation of cryptocurrency transactions within the EU. By introducing tax reporting requirements for crypto-assets, the EU aims to enhance transparency and combat potential tax evasion or money laundering activities in this rapidly evolving industry. While this comes with its own challenges and potential impact on businesses, it is a step towards creating a more secure and regulated environment for cryptocurrency transactions in the European market.