EU Council adopts DAC8: Another directive to strengthen the exchange of information in the field of taxation
On 17 October 2023, the Council of the European Union adopted Directive 2011/16/EU on administrative cooperation in the field of taxation (DAC8), aimed at strengthening the cooperation and exchange of information between national tax authorities. This directive primarily focusses on crypto-assets and tax rulings for high-net-worth individuals. It also takes the opportunity to extend the scope of the categories of income subject to exchange of information.
Crypto assets
Currently, crypto assets are excluded from the EU exchange of information mechanisms. DAC8 mandates an automatic exchange of information, compelling crypto-asset service providers to engage in comprehensive reporting. This requirement comes from the inherent difficulty in tracking and taxing dematerialised assets, leading to multiple challenges for tax authorities within the EU.
A comprehensive range of crypto-assets are targeted drawing from the definitions outlined in the EU regulation 2023/1114 on markets in crypto-assets (MiCA) adopted on 28 June 2023. In a nutshell, it should cover any crypto asset which can be used for payment or investment such as stablecoins, e-money tokens, and certain NFTs.
Any crypto-asset service provider, irrespective of their size, would need to carry out appropriate due diligence procedures to identify, through self-certification, if their customer should be reportable or not (eg if the customer uses a crypto asset service provider to exchange or trade their crypto assets). This procedure would be applicable to new and existing clients and would need to be completed within 12 months from the entry into force of DAC8.
Once identified, the crypto asset service provider will need to collect the information (eg Tax Identification Number “TIN”) and report the information to the relevant competent authority.
Failure to comply with these obligations could trigger penalties ranging from €50,000 to €150,000.
Extension to the categories of income subject to exchange of information
DAC8 also extends the scope of the categories of income subject to the exchange of information by extending the scope to non-custodial dividends and royalties.
The exchange of information related to the above categories of income should be applicable as from 1 January 2026.
Tax rulings for high-net-worth individuals
DAC3 already introduced the exchange of information of tax rulings, however, DAC8 extends the existing scope in order to include the exchange of tax rulings for high-net-worth individuals amended or renewed after 1 January 2026 and when the amount of the transaction(s) exceeds €1,500,000 or if the ruling determines if an individual is resident or not for tax purposes in a Member State.
The European Council’s press release can be found here.
For more detailed information, our blog post on MiCA regulation can be accessed here.
