Recently, the European Parliament made a significant move by overwhelmingly approving the DAC8, a legislative measure introducing comprehensive tax reporting requirements for cryptocurrency transactions across the EU.
With a staggering 535 votes in favour, 57 against, and 60 abstentions, the proposed rule is now on its way to becoming law. This overwhelming support indicates the EU's dedication to ensuring the crypto sector operates within a regulated framework.
Understanding the DAC8 Rule
The European Union Directive on Administrative Cooperation (DAC) dates back to 2011. Instead of focusing on the imposition and collection of taxes, this directive emphasises the gathering and streamlined sharing of tax-related data about individuals and businesses among Member States.
As per the EU,
“The DAC has been revised six times in the last decade (DAC1-DAC7), in particular in the light of budgetary constraints following the financial crisis of 2008, the rise of tax scandals (Luxleaks, Panama papers, etc.), and improved cooperation opportunities through digitalisation. These revisions have expanded both the scope of taxpayers and the type of data about which reporting is required. This ranges from individuals' bank account details to the income earned by sellers on digital sales platforms.”
The DAC8 directive, proposed on 8 December 2022, mandates crypto-asset service providers to report transactions involving EU clients to the tax authorities of EU member states.
The directive identifies crypto-asset providers and operators as entities obliged to report information to local authorities. It encompasses all crypto-assets usable for investment and payment purposes, including e-money, e-money tokens, and central bank digital currencies.
As the EU states, “The DAC8 proposal focuses on the exchange of information about the gains and profit made from crypto-transactions by EU users.”
This initiative is aimed at facilitating the automatic exchange of crypto asset information among EU tax authorities, ensuring that all transactions are transparent and taxable.
The Role of Tax Identification Numbers (TINs)
TINs play a crucial role in the reporting and monitoring of tax-related data. However, only a small minority of Member States actively collect and share TINs.
The European Parliament Research Service recommends increasing the use of TINs to enhance the efficiency of data exchange and cross-checking of information among Member States.
The Global Perspective on Crypto-Asset Transactions
The European Parliament emphasises the need for an international approach to address the taxation challenges of crypto-assets and e-money.
The OECD has developed a reporting framework (CARF) to help countries track crypto-asset transactions and collect information for tax purposes. The DAC8 proposal aligns with the OECD’s initiatives, integrating both the CARF and the latest changes to the Common Reporting Standard (CRS) into the EU’s legal framework.
Reporting Framework for Crypto-Asset Transactions
The proposed directive follows the provisions of the OECD’s CARF and builds on the definitions used in MiCA for service providers and crypto-assets.
It aims to balance the granularity of the information requested and the administrative burden on crypto-asset providers.
The directive does not oblige Member States to impose taxes on the transactions but focuses on the reporting of information.
Financial Implications of this New Crypto Tax Reporting Rule
The European Commission anticipates that the implementation of this EU-wide crypto-asset reporting framework could generate additional tax revenue ranging from €1 billion to €2.4 billion annually.
This projection is based on an impact assessment report by the European Parliamentary Research Service (EPRS).
Here are some of the key amendments brought forward by the DAC8 for crypto tax reporting:
Staking and Lending Exclusion: Staking and lending will not be categorised as "Crypto-Asset Services." They will only be relevant for transaction reporting. This change prevents potential regulatory inconsistencies and avoids ambiguities in the term "staking."
Crypto-Asset Classification: The requirement for CASPs to report the usability of crypto-assets for payment and investment on a case-by-case basis has been removed. This ensures uniformity in crypto-asset classification.
Penalty Regime: The proposed minimum penalties were eliminated. An interim penalty regime for SMEs has been introduced, with maximum fines capped at 1% of the global turnover of the reporting entity.
European TIN Consideration: The DAC8 reporting will not rely on the European TIN. The European Parliament has separated the provisions and is reconsidering the introduction of a European TIN.
Reporting Deadlines: Member States have an extra year for DAC8 transposition. However, data collection starts from 1st January 2026, with CASPs reporting by July 31 of the subsequent year.
Effective Implementation: Member States must utilise the DAC information effectively. They are mandated to set up systems for data evaluation and risk assessment.
To know all the amendments in detail, refer to the report here.
Harmonisation and Coordination on Penalties
The European Union is moving towards a more harmonised approach to penalties associated with crypto-asset transactions.
The OECD and various countries continue to discuss the tax treatment of crypto-trading, aiming for a common understanding and effectiveness in the implementation of penalties.
The European Parliament has also called for more harmonised and effective sanctions to deter non-compliance.
As per EU, “In case more than 25 % of an individual's or entity's report is made up of incomplete, incorrect or false data, or if they fail to file a report at all, including after two administrative reminders, the Commission proposes that Member States put penalties of a minimum financial amount in place.”
The directive is in line with the OECD's (Organisation for Economic Co-operation and Development) common reporting standard (CRS). It identifies two categories of entities required to report information to local authorities:
Crypto-asset providers: this is any legal person or undertaking whose professional activity includes one or more crypto-asset services to third parties.
Crypto-asset operators: this includes any provider of crypto-asset services other than a crypto-asset service provider. These providers do not fall within the scope of MiCA.
These entities, known as reportable crypto-asset service providers (RCASPs), must adhere to DAC's reporting requirements if they have users within the EU, irrespective of their size or location.
The range of reportable transactions by RCASPs is vast, covering crypto-asset exchanges, transfers involving fiat currencies, and transactions between different crypto assets.
Timeline and Future Implications of the DAC8 Rule
DAC8 is scheduled to take effect on January 1, 2026. This timeline provides ample time for regulatory preparation and the implementation of Markets in Crypto-Assets (MiCA) regulations. MiCA, which laid the groundwork for the approval of DAC in May 2023, represents the eighth iteration, addressing various facets of financial oversight.
In its current form, DAC8 aligns with the Crypto-Asset Reporting Framework (CARF) and MiCA legislation, comprehensively covering all crypto-asset transactions within the EU.
EU member states have to integrate these rules until December 31, 2025, with DAC8's official enactment set for January 1, 2026.
Conclusion
The adoption of DAC8 underscores the EU's commitment to regulating and taxing crypto transactions, positioning the region as a proactive participant in the ever-evolving crypto landscape.
As the cryptocurrency industry continues to grow and evolve, major economic players like the EU must set standards and regulations that ensure the safety and transparency of transactions for all parties involved.
Want to ensure compliance while calculating crypto taxes? Sign Up on Kryptos for free and simplify your tax journey now.
FAQs
1. What is the DAC8 rule?
The DAC8 is a legislative measure introduced by the European Union to enforce comprehensive tax reporting requirements for cryptocurrency transactions across its member states.
2. How does the DAC8 rule differ from previous EU directives on cryptocurrency?
While the EU has had the Directive on Administrative Cooperation (DAC) since 2011, the DAC8 specifically amends this directive to mandate crypto-asset service providers to report transactions involving EU clients, ensuring transparency and regulation in the crypto sector.
3. Which entities are required to report under the DAC8 rule?
The directive identifies crypto-asset providers and crypto-asset operators as the primary entities required to report. These entities, known as reportable crypto-asset service providers (RCASPs), must adhere to the DAC's reporting requirements if they cater to users within the EU.
4. When will the DAC8 rule take effect?
The DAC8 rule is scheduled to be implemented on January 1, 2026. This allows for adequate regulatory preparation and the integration of other related regulations like the Markets in Crypto-Assets (MiCA).
5. How will the DAC8 rule impact the overall crypto landscape in the EU?
The introduction of the DAC8 rule underscores the EU's commitment to regulating and taxing crypto transactions. It aims to position the region as a proactive participant in the evolving crypto world, ensuring safety, transparency, and fiscal responsibility for all involved parties.
All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!
Country
Issue
Kryptos Use Case
India
Cryptocurrency transactions are taxed as capital gains, with evolving legislation creating uncertainty.
Kryptos.io streamlines the process by automatically tracking transactions and computing capital gains, adjusting to new regulations for precise reporting.
Brazil
Cryptocurrencies are subject to capital gains tax and must be reported, posing challenges with complex requirements.
Kryptos.io simplifies compliance by offering real-time transaction tracking and detailed tax calculations, making it easier to meet Brazil’s tax obligations.
Nigeria
Regulatory framework for cryptocurrencies is evolving, with uncertainty around taxation and restrictions from the Central Bank.
Kryptos.io provides an adaptable solution by maintaining detailed records and generating flexible reports, helping users stay compliant despite regulatory changes.
USA
Cryptocurrency transactions are subject to capital gains tax, with detailed IRS reporting requirements.
Kryptos.io enhances compliance by automating the tracking of transactions and generating comprehensive tax reports, facilitating adherence to IRS requirements.
UK
Cryptocurrencies are taxed under both capital gains tax and income tax, requiring careful tracking and reporting.
Kryptos.io aids UK users by monitoring both capital gains and income from crypto transactions, ensuring accurate and straightforward tax reporting.
Australia
Cryptocurrencies are subject to capital gains tax, and users must report their gains and losses to the ATO.
Kryptos.io assists Australian users by providing seamless transaction tracking and precise capital gains calculations, ensuring efficient compliance with ATO reporting requirements.
Germany
Cryptocurrencies are taxed as private assets with gains subject to tax if held for less than a year.
Kryptos.io supports German users by tracking holding periods and computing taxes on cryptocurrency transactions, ensuring adherence to German tax regulations.
Japan
Cryptocurrency gains are treated as miscellaneous income and are subject to high tax rates.
Kryptos.io helps Japanese users by offering a detailed tracking system and calculating taxes on miscellaneous income, efficiently managing high tax obligations.
Scenario
Description
Kryptos Features that can be of aid
Multiple Exchanges and Wallets
Consolidating records from various exchanges and wallets to maintain a comprehensive overview of crypto activities.
Seamless integration with numerous exchanges and wallets, automatic import, and consolidation of records.
International Transactions
Managing records for cross-border transactions, including currency conversions and compliance with international tax laws.
Support for multiple currencies, efficient management of cross-border activities, accurate currency conversion for reporting.
Complex Transactions
Handling trades, swaps, staking, lending, and other sophisticated crypto activities.
Advanced tracking, reporting, and documentation for various transaction types. Kryptos' DeFi and NFT modules offer specialized tools for managing decentralized finance and NFT activities, ensuring precise records and comprehensive oversight.
How we reviewed this article
Written by
Brihasi Dey
Social Media Manager, Content Writer, Strategist, and Marketer - An IT graduate well versed in SaaS, AI, & Web3, assisting Tech and Blockchain brands in scaling with Content.
As Web3 evolves, managing a diverse portfolio has become complex. Kryptos simplifies this with advanced tools for real-time tracking, NFT management, and DeFi analytics. Discover how Kryptos turns challenges into strategic advantages for modern investors.
Struggling with crypto tax in Australia? Kryptos.io simplifies the process, ensuring accurate and compliant filings with the ATO. Track transactions and value assets effortlessly—make tax season stress-free.
Mastering Crypto Taxation: Navigate the Complex World of Digital Assets with Kryptos, the Ultimate Solution for Accurate, Efficient, and Future-Proof Tax Reporting.
See More
The DAC8 Tax Reporting Rule Got Approved by the European Union Parliament
By
Brihasi Dey
On
Recently, the European Parliament made a significant move by overwhelmingly approving the DAC8, a legislative measure introducing comprehensive tax reporting requirements for cryptocurrency transactions across the EU.
With a staggering 535 votes in favour, 57 against, and 60 abstentions, the proposed rule is now on its way to becoming law. This overwhelming support indicates the EU's dedication to ensuring the crypto sector operates within a regulated framework.
Understanding the DAC8 Rule
The European Union Directive on Administrative Cooperation (DAC) dates back to 2011. Instead of focusing on the imposition and collection of taxes, this directive emphasises the gathering and streamlined sharing of tax-related data about individuals and businesses among Member States.
As per the EU,
“The DAC has been revised six times in the last decade (DAC1-DAC7), in particular in the light of budgetary constraints following the financial crisis of 2008, the rise of tax scandals (Luxleaks, Panama papers, etc.), and improved cooperation opportunities through digitalisation. These revisions have expanded both the scope of taxpayers and the type of data about which reporting is required. This ranges from individuals' bank account details to the income earned by sellers on digital sales platforms.”
The DAC8 directive, proposed on 8 December 2022, mandates crypto-asset service providers to report transactions involving EU clients to the tax authorities of EU member states.
The directive identifies crypto-asset providers and operators as entities obliged to report information to local authorities. It encompasses all crypto-assets usable for investment and payment purposes, including e-money, e-money tokens, and central bank digital currencies.
As the EU states, “The DAC8 proposal focuses on the exchange of information about the gains and profit made from crypto-transactions by EU users.”
This initiative is aimed at facilitating the automatic exchange of crypto asset information among EU tax authorities, ensuring that all transactions are transparent and taxable.
The Role of Tax Identification Numbers (TINs)
TINs play a crucial role in the reporting and monitoring of tax-related data. However, only a small minority of Member States actively collect and share TINs.
The European Parliament Research Service recommends increasing the use of TINs to enhance the efficiency of data exchange and cross-checking of information among Member States.
The Global Perspective on Crypto-Asset Transactions
The European Parliament emphasises the need for an international approach to address the taxation challenges of crypto-assets and e-money.
The OECD has developed a reporting framework (CARF) to help countries track crypto-asset transactions and collect information for tax purposes. The DAC8 proposal aligns with the OECD’s initiatives, integrating both the CARF and the latest changes to the Common Reporting Standard (CRS) into the EU’s legal framework.
Reporting Framework for Crypto-Asset Transactions
The proposed directive follows the provisions of the OECD’s CARF and builds on the definitions used in MiCA for service providers and crypto-assets.
It aims to balance the granularity of the information requested and the administrative burden on crypto-asset providers.
The directive does not oblige Member States to impose taxes on the transactions but focuses on the reporting of information.
Financial Implications of this New Crypto Tax Reporting Rule
The European Commission anticipates that the implementation of this EU-wide crypto-asset reporting framework could generate additional tax revenue ranging from €1 billion to €2.4 billion annually.
This projection is based on an impact assessment report by the European Parliamentary Research Service (EPRS).
Here are some of the key amendments brought forward by the DAC8 for crypto tax reporting:
Staking and Lending Exclusion: Staking and lending will not be categorised as "Crypto-Asset Services." They will only be relevant for transaction reporting. This change prevents potential regulatory inconsistencies and avoids ambiguities in the term "staking."
Crypto-Asset Classification: The requirement for CASPs to report the usability of crypto-assets for payment and investment on a case-by-case basis has been removed. This ensures uniformity in crypto-asset classification.
Penalty Regime: The proposed minimum penalties were eliminated. An interim penalty regime for SMEs has been introduced, with maximum fines capped at 1% of the global turnover of the reporting entity.
European TIN Consideration: The DAC8 reporting will not rely on the European TIN. The European Parliament has separated the provisions and is reconsidering the introduction of a European TIN.
Reporting Deadlines: Member States have an extra year for DAC8 transposition. However, data collection starts from 1st January 2026, with CASPs reporting by July 31 of the subsequent year.
Effective Implementation: Member States must utilise the DAC information effectively. They are mandated to set up systems for data evaluation and risk assessment.
To know all the amendments in detail, refer to the report here.
Harmonisation and Coordination on Penalties
The European Union is moving towards a more harmonised approach to penalties associated with crypto-asset transactions.
The OECD and various countries continue to discuss the tax treatment of crypto-trading, aiming for a common understanding and effectiveness in the implementation of penalties.
The European Parliament has also called for more harmonised and effective sanctions to deter non-compliance.
As per EU, “In case more than 25 % of an individual's or entity's report is made up of incomplete, incorrect or false data, or if they fail to file a report at all, including after two administrative reminders, the Commission proposes that Member States put penalties of a minimum financial amount in place.”
The directive is in line with the OECD's (Organisation for Economic Co-operation and Development) common reporting standard (CRS). It identifies two categories of entities required to report information to local authorities:
Crypto-asset providers: this is any legal person or undertaking whose professional activity includes one or more crypto-asset services to third parties.
Crypto-asset operators: this includes any provider of crypto-asset services other than a crypto-asset service provider. These providers do not fall within the scope of MiCA.
These entities, known as reportable crypto-asset service providers (RCASPs), must adhere to DAC's reporting requirements if they have users within the EU, irrespective of their size or location.
The range of reportable transactions by RCASPs is vast, covering crypto-asset exchanges, transfers involving fiat currencies, and transactions between different crypto assets.
Timeline and Future Implications of the DAC8 Rule
DAC8 is scheduled to take effect on January 1, 2026. This timeline provides ample time for regulatory preparation and the implementation of Markets in Crypto-Assets (MiCA) regulations. MiCA, which laid the groundwork for the approval of DAC in May 2023, represents the eighth iteration, addressing various facets of financial oversight.
In its current form, DAC8 aligns with the Crypto-Asset Reporting Framework (CARF) and MiCA legislation, comprehensively covering all crypto-asset transactions within the EU.
EU member states have to integrate these rules until December 31, 2025, with DAC8's official enactment set for January 1, 2026.
Conclusion
The adoption of DAC8 underscores the EU's commitment to regulating and taxing crypto transactions, positioning the region as a proactive participant in the ever-evolving crypto landscape.
As the cryptocurrency industry continues to grow and evolve, major economic players like the EU must set standards and regulations that ensure the safety and transparency of transactions for all parties involved.
Want to ensure compliance while calculating crypto taxes? Sign Up on Kryptos for free and simplify your tax journey now.
FAQs
1. What is the DAC8 rule?
The DAC8 is a legislative measure introduced by the European Union to enforce comprehensive tax reporting requirements for cryptocurrency transactions across its member states.
2. How does the DAC8 rule differ from previous EU directives on cryptocurrency?
While the EU has had the Directive on Administrative Cooperation (DAC) since 2011, the DAC8 specifically amends this directive to mandate crypto-asset service providers to report transactions involving EU clients, ensuring transparency and regulation in the crypto sector.
3. Which entities are required to report under the DAC8 rule?
The directive identifies crypto-asset providers and crypto-asset operators as the primary entities required to report. These entities, known as reportable crypto-asset service providers (RCASPs), must adhere to the DAC's reporting requirements if they cater to users within the EU.
4. When will the DAC8 rule take effect?
The DAC8 rule is scheduled to be implemented on January 1, 2026. This allows for adequate regulatory preparation and the integration of other related regulations like the Markets in Crypto-Assets (MiCA).
5. How will the DAC8 rule impact the overall crypto landscape in the EU?
The introduction of the DAC8 rule underscores the EU's commitment to regulating and taxing crypto transactions. It aims to position the region as a proactive participant in the evolving crypto world, ensuring safety, transparency, and fiscal responsibility for all involved parties.
All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!
As Web3 evolves, managing a diverse portfolio has become complex. Kryptos simplifies this with advanced tools for real-time tracking, NFT management, and DeFi analytics. Discover how Kryptos turns challenges into strategic advantages for modern investors.
Struggling with crypto tax in Australia? Kryptos.io simplifies the process, ensuring accurate and compliant filings with the ATO. Track transactions and value assets effortlessly—make tax season stress-free.
Mastering Crypto Taxation: Navigate the Complex World of Digital Assets with Kryptos, the Ultimate Solution for Accurate, Efficient, and Future-Proof Tax Reporting.