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The European Council has approved updated rules expanding tax reporting requirements to include the transfer of crypto assets. This is the eighth version of the Directive on Administrative Cooperation (DAC), which is a set of procedures for the automatic exchange of information between European governments for tax purposes.
DAC8 was proposed in December and approved on May 16 following the passage of Markets in Crypto-Assets (MiCA) as it depends on the definitions set out in this legislation. The new DAC adheres to the Crypto Asset Reporting Framework (CARF) and the amendments to reporting standards published by the Organization for Economic Co-operation and Development (OECD) in October, in line with the G20 mandate.
Related: What’s Next for the EU Crypto Industry When the European Parliament Passes the MiCA?
DAC8 requires Crypto Asset Service Providers (CASPs) to collect information on transfers of Crypto Assets of any amount to ensure traceability and detection of suspicious transactions. It tightens the European Union’s anti-money laundering and terrorist financing (AML/CFT) rules and proposes the creation of a new European anti-money laundering body. The proposed regulation would require CASPs to:
“Ensure that transfers of crypto assets are accompanied by the name of the beneficiary, the address of the distributed registry of the beneficiary in cases where the transfer of crypto assets is registered on the network using DLT or similar technology, [и] beneficiary’s account number, where such an account exists.”
The proposed regulation further clarifies: “Information must be provided in a secure manner and before, at the same time or concurrently with the transfer of cryptoassets.”
In addition to the new requirements for CASP, DAC8 includes new reporting rules for high net worth individuals and more stringent reporting requirements for tax identification numbers.
We welcome the political agreement reached by EU Finance Ministers today on new tax transparency rules on the crypto-asset sector.
The Directive will improve EU countries’ ability to detect and counter tax fraud, tax evasion and tax avoidance.
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— European Commission (@EU_Commission) May 16, 2023
This was stated by the Minister of Finance of Sweden Elisabeth Svantesson.
“Today’s decision is bad news for those who have misused crypto assets for their illegal activities to circumvent EU sanctions or fund terrorism and war. In Europe, this will not be possible without impact.”
Changes to the DAC are not made through legislation, but through a process of consultation between member states of the European Council.