New reporting framework on the crypto-asset sector will help tax authorities to track the trade of crypto-assets and exchange of information about proceeds gained.
On 16 May 2023, the Economic and Financial Affairs Council of the EU (ECOFIN) reached agreement on the proposal to extend the Council Directive 2011/16 on Administrative Cooperation (DAC) to cover the exchange of information on crypto-assets, as well as tax rulings for individuals (DAC8). The agreed text is largely in line with the initial proposal issued by the European Commission.
Key provisions of DAC8 include:
Crypto-assets and e-money: extending the EU tax transparency rules to cover crypto-assets and e-money. In line with the initial EC proposal, DAC8 would apply to all crypto-assets service providers (CASPs), irrespective of whether they are regulated under the Markets in crypto-assets (MiCA) Regulation or not. As a first step, in-scope CASPs would be required to collect and verify – in line with specific due diligence procedures, information from EU clients. Subsequently, certain information would be reported to the relevant competent authorities. Under a third step, this information would be exchanged by the recipient Member State with the tax authorities of the Member State where the reportable user is tax resident. The rules proposed are largely consistent with the OECD’s Crypto-Asset Reporting Framework (CARF) and aligned with the definitions included in the MiCA Regulation. For more details on the differences between CARF and DAC8, please refer to the related KPMG Insights piece.
Rulings issued to high-net-worth individuals: extending the automatic exchange of advanced cross-border rulings to cover rulings issued in respect of individuals.
Reporting of the tax identification number (TIN): DAC8 introduces new requirements and strengthens existing requirements to collect and exchange information on TINs for a number of the reporting obligations introduced by the various versions of DAC.
Reporting of cross-border arrangements (DAC6): Amendments were included to comply with the CJEU decision in case C-694/20 in relation to the obligations of reporting intermediaries which are bound by legal professional privilege (On December 8, 2022, the Court of Justice of the European Union (CJEU or the Court) gave its decision in case C-694/20 concerning compatibility with EU law of the requirement for intermediaries, who are subject to legal professional privilege, to notify other intermediaries of their reporting obligation under the EU mandatory disclosure rules (DAC6). The CJEU held that the notification obligation is invalid in light of the fundamental rights guaranteed by the Charter of Fundamental Rights of the European Union (the Charter) - specifically the right to respect for communications between a lawyer and his or her client (Article 7)).
Other: extending the scope of the mandatory automatic exchange of information between Member States to cover non-custodial dividend income.
Note that a common system of minimum penalties for serious non-compliance offences, which was included in the earlier proposal by the European Commission and that would have been applicable both to existing and proposed disclosure requirements was removed in the agreed compromise text.
The Directive will be formally adopted once the European Parliament have given their non-binding opinion. The Parliament's Committee on Economic and Monetary Affairs (ECON) has tabled several amendments to the text. The proposed changes are tentatively scheduled to be adopted by ECON on May 30, 2023, and the file is expected to be voted in the Parliament’s plenary sitting on July 10, 2023. The Directive will be published in the Official Journal of the EU after formal sign off by the Council.
With the exception of the TIN related provisions above, Member States would need to transpose the Directive by December 31, 2025. The rules would become applicable as of January 1, 2026 (with some exceptions).
Source: ETC News
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