The proposal for a Council Directive, amending Directive 2011/16/EU on administrative cooperation in the field of taxation, puts forward changes to existing provisions on exchanges of information and administrative cooperation. It also extends the Directive’s scope to the automatic exchange of information with respect to information reported by reporting crypto-asset service providers. The rules on due diligence procedures, reporting requirements and other rules applicable to reporting crypto-asset service providers are based on the OECD crypto-asset reporting framework.
The main problem addressed by the initiative is that tax authorities lack information to monitor the proceeds obtained using crypto-assets. The under-reporting of data related to revenues and income gained by crypto-asset users severely limits the ability of tax administrations to ensure that due taxes are effectively paid. Crypto-assets are currently not within the scope of the Directive on Administrative Cooperation (Council Directive 2011/16/EU (DAC)), which provides for automatic exchange of information between Member States for tax purposes. Internet-based products, services and applications, in particular those that take advantage of distributed networks, such as crypto-assets, are easily traded cross-border. This creates tax challenges in terms of access to information, which can only be solved through strong administrative cooperation between countries.
As a general objective, the proposal of the EU Commission aims at ensuring a fair and efficient functioning of the single market by increasing overall tax transparency. This would benefit not only tax authorities but also users and service providers. This initiative also aims at safeguarding Member State tax revenues by extending and clarifying the reporting obligations concerning crypto-assets within the European Union. The current proposal (DAC8) should more specifically improve the ability of Member States to detect and counter tax fraud, tax evasion and tax avoidance. It should also deter non-compliance.
According to the EU Commissione, Member State actions do not provide an efficient and effective solution to problems that are transnational in essence. Therefore, the EU Commissione believes that as EU approach appears preferable to avoid a patchwork of reporting requirements unilaterally implemented by some or all Member States. Action at EU level ensures coherence, reduces administrative burden for reporting entities and tax authorities, and is more robust in relation to potential loopholes due to the volatile nature of the assets concerned.
According to the EU Commissione, the preferred choice of intervention is a legislative initiative with intermediate coverage. All crypto-asset service providers, irrespective of their size and country of establishment, would need to report when performing transactions for clients resident in the EU. This will create a new reporting framework and exchange of information between tax administrations. The initiative will encompass marketable crypto-assets where the aim is to exchange transactional information, albeit with some degree of aggregation.
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