EU Adopts DAC8 Crypto-Asset and Trading Tax Reporting Rule

Facilitating the automatic exchange of crypto-asset information among EU member states, the EU Directive of Administrative Cooperative (DAC8) was sanctioned and adopted by the Council of the European Union on October 17, 2023. This legislative measure gives EU national tax authorities the jurisdiction to track and evaluate every crypto-asset transaction carried out by individuals and entities that have tax residence within any EU member state.

Although a relatively new sector, the dynamic nature and digital characteristics of crypto-assets used for investment and payment purposes has, until now, been challenging for individual tax authorities to regulate and identify taxable events. This is further complicated when crypto-asset trading is carried out by entities located in or established in another country. The adoption of DAC8 – now in its eighth iteration – demonstrates the EU’s active commitment to regulate and tax reportable crypto-asset transactions.

Introduced to help detect and counter tax evasion, the directive will require all crypto-asset entities, categorized as reportable crypto-asset service providers (RCASPs), to comply with the reporting requirements if they have users with tax residence in the EU. This is regardless of the size or where the RCASP entity is located.

The DAC8 directive is scheduled to be implemented on January 1, 2026. It will require the tax authority in each individual EU member state to incorporate the rules into their domestic legislation by December 31, 2025.

The primary essential identifier for the reporting process will be the tax identification number (TIN). In order to correctly determine the relevant tax liability, the EU Commission has committed to developing a verification tool that will allow EU tax authorities to collect and share TINs.

Subject to reporting will be all crypto-assets used for investment and payment purposes. This includes e-money and e-money tokens, asset-referenced currency tokens (e.g. fiat currencies), central bank digital currencies, as well as crypto-asset exchanges. Income derived from non-custodial dividends has also been listed as income that will be subject to the automatic exchange of information through DAC8.

Scope of the DAC8 has also been extended to include the automatic exchange of advance cross-border rulings for high net-worth individuals. This includes individual persons who hold a minimum of €1.000.000 in financial or investable wealth, or in assets under management.

Adoption of these new rules offer multiple benefits, including the mutual exchange of tax information, greater legal certainty about crypto-assets, as well as helping to regulate risks and safeguard against financial crime and market manipulation.

DAC8 is closely aligned to the OECD Crypto-Asset Reporting Framework. A joint statement by countries that are active in the global crypto markets, and are pushing for this international standard, was released in November 2023. It is hoped that CARF will be rapidly transposed into domestic laws, with each jurisdiction commencing global crypto-asset exchanges by 2027.

Reporting will be conducted using a designated electronic form within nine months following the end of the calendar year. The initial reporting period is due to commence on January 1, 2026.

For further information

Zuzana Korytárová
Tax manager
https://sk.vgd.eu/en/team/zuzana-korytarova

Miroslav Marcinčin
Tax Partner
https://sk.vgd.eu/en/team/miroslav-marcincin

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