On May 16th 2023, the Council of the European Union (the Council) convened an Economic and Financial Affairs Council (ECOFIN) meeting, during which the finance ministers of the European Union (EU) reached a significant milestone. They achieved a political consensus (general approach) on a compromise text for the Directive on administrative cooperation, which implements the rules of the Organisation for Economic Co-operation and Development (OECD) regarding reporting for crypto assets. Additionally, amendments to the Common Reporting Standard (CRS) were included in this Directive, referred to as DAC8.
What does the DAC8 entail?
This directive (DAC8) establishes new reporting obligations concerning crypto assets and their transactions for EU resident clients who utilize reporting crypto-asset service providers. Furthermore, it broadens the scope of cross-border rulings exchange to encompass situations involving natural persons in specific scenarios. Moreover, it introduces the option to exchange information received through the DAC framework for non-tax-related purposes.
The compromise text, which was released ahead of the ECOFIN meeting by the Swedish Council presidency, is the outcome of negotiations among the Member States. These negotiations resulted in amendments to the initial proposal published by the European Commission (the Commission) on December 8th 2022.
Looking ahead, it is anticipated that the Directive will be officially adopted in early June, subsequent to the completion of the parliamentary consultation process on May 30th 20231. Following the Council's formal adoption of DAC8, Member States will generally have until 31st December 2025 to incorporate the principal rules into their national legislation.
Exceptions on the DAC8
The provisions outlined in the Directive will come into effect from 1st January 2026, albeit with some exceptions. Specifically, the Directive includes provisions concerning the reporting of Tax Identification Numbers (TINs) and the subsequent automatic exchange of information. These provisions pertain to two key aspects:
- Advanced Cross-Border Rulings, Country-by-Country Reports, and Mandatory Disclosure Rules (MDR): Member States are required to incorporate these provisions into their national legislation by 31st December 2027. The provisions will come into effect from 1st January 2028. This timeline ensures that the necessary legal frameworks and systems are established to facilitate the efficient exchange of information related to advanced cross-border rulings, Country-by-Country Reports, and MDR.
- Income from Employment, Director's Fees, and Pensions: Member States are given until 31st December 2029 to transpose the provisions regarding income from employment, director's fees, and pensions into their national laws. These provisions will then become applicable from 1st January 2030. This timeframe allows Member States to implement the necessary measures to capture and report relevant information regarding income from employment, director's fees, and pensions accurately.
By setting these timelines, the Directive provides Member States with a clear framework for incorporating these specific provisions into their national legislation. This approach ensures a harmonized and coordinated implementation of the reporting requirements, allowing for effective automatic exchange of information among EU countries.
Member States were not able to agree on the framework of minimum penalties proposed by the Commission. Therefore, the related article was removed from the final text meaning that penalties remain within the discretion of Member States, but should be effective, proportionate and dissuasive.
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https://www.europarl.europa.eu/RegData/etudes/BRIE/2023/739310/EPRS_BRI(2023)739310_EN.pdf
