EU publishes Directive proposal on tax transparency rules for crypto-assets

  • The European Commission has published proposals to revise the Directive on administrative cooperation to implement the Organisation for Economic Co-operation and Development’s (OECD) rules on reporting for crypto-assets.

  • The rules will require institutions offering crypto-asset services or e-money services to customers in the European Union (EU) to report, with 2026 as the first year to report on (by 31 January 2027).

  • The proposed rules also contain updates to existing automatic exchange of information rules, including establishing minimum penalties for non-compliance across all aspects of automatic exchange of information and provisions targeting high net worth individuals.

Executive summary

On 8 December 2022, the European Commission (the Commission) published a legislative proposal for revision of the Directive on Administrative Cooperation (Council Directive 2011/16/EU or DAC). It proposes to include further categories of income and assets such as crypto-assets as also defined in the proposed Regulation on Market in Crypto-Assets (MiCA) into the scope of the automatic exchange of information (AEOI).

These rules will implement the OECD Crypto-Assets Reporting Framework (CARF) into EU law, with a proposed start date of 1 January 2026. However, the rules go further than the OECD package of crypto-asset rules and Common Reporting Standard (CRS) amendments and affected organizations will need to be aware of the differences, which include a requirement for non-EU entities to report inside the EU under certain circumstances.

The proposal also makes several consequential amendments to the rules for AEOI in the EU, which include bringing e-money institutions into the scope of reporting, and setting minimum penalties across the EU. In addition, the proposal expands the scope of reporting under existing measures including enhanced reporting by tax authorities on high net-worth individuals, reporting by banks and financial institutions on financial accounts, and the introduction of a verification tool on taxpayer identification numbers (TINs) for governments. Also, information exchanged under the DAC may be used for the detection of violation or circumvention of restrictive measures (EU sanctions).

On the same date, the Commission also launched a public consultation for feedback on the proposal with a deadline of 2 February 2023.

Detailed discussion


On 10 March 2021, the Commission launched a public consultation which ran until 2 June 2021 on new rules on the reporting and exchange of information for tax purposes on e-money and crypto-assets as well as new rules on penalties and compliance measures for the various reporting obligations under the DAC.

On 8 December 2022, the Commission released a legislative proposal that aims at improving existing provisions of the DAC and extending the scope of automatic exchange to certain specific information reported by reporting crypto-asset service providers, expected to be known as DAC8.

Two months prior, the OECD published the final rules and commentary of the CARF[i] and enhancements to the CRS. The OECD proposals cover two main aspects:

  1. The adoption of the CARF: a new Automatic Exchange of Information package. Inspired by the CRS, the aim of the CARF is to capture all transactions involving crypto-assets by requiring intermediaries to report on the transactions of their customers.

  2. Amending existing CRS rules to cover digital ?nancial products, and changes have been made to allow a broader scope of reporting. Revisions of the CRS also include enhancement of the due diligence procedures and additional ?elds of reporting, that will require ?nancial institutions to review their procedures and processes.

The DAC: A recap

The DAC originally provided for cooperation between tax authorities and the exchange of information on employment income, pension income and certain other payments. Since then, it has been amended multiple times to allow for the automatic exchange of information across multiple fields of taxation.

Amendment Content Affected parties
DAC2 Common Reporting Standard Banks, investment entities, asset managers, insurers
DAC3 Exchange of Information on Tax Rulings Tax authorities
DAC4 Country-by-country reporting Large corporates
DAC5 Exchange of beneficial ownership information Trust companies, corporate service providers
DAC6 Mandatory Disclosure Regime Intermediaries including accountants, tax advisors, lawyers, financial institutions
DAC7 Digital Platforms Information Reporting and joint audit provisions Digital platforms involved in the sale of goods, rental of accommodation or transport, or personal services
DAC8 Crypto-Asset Reporting Framework, CRS amendments and wider amendments Crypto-Asset Service Providers, e-money institutions, and other consequential changes

In addition to the DAC, the EU has also passed rules under the Regulation on Administrative Cooperation in Value-Added Tax matters which requires reporting by Payment Service Providers registered under the Payment Services Directive, which commences in 2024. Those rules, known as CESOP (Central Electronic System of Payments) are likely to affect many of the same institutions in scope for either DAC2, DAC7 or DAC8.

The cumulative effect of DAC7, DAC8 and CESOP is that a relevant proportion of the digital economy will be brought into the scope of automatic exchange of information and will begin reporting on their customers between 2024 and 2026.

Specific details of DAC8

Timing of application

The proposed Directive requires Member States to apply the new rules from 1 January 2026. The proposed 2026 start date will allow the proposed MiCA to be adopted and fully implemented before reporting crypto-asset service providers (RCASPs) need to begin the implementation of DAC8.

Alignment with CARF

The proposed legislation substantially follows the OECD CARF package. It also aligns closely to MiCA, using the same definitions for Crypto-Asset Service Providers, Crypto-Asset Services and Crypto-Assets.

In practical terms, that means that RCASPs will be either entities that are registered under MiCA (Crypto-Assets Service Providers) or entities that provide Crypto-Asset Services under MiCA but are not required to register for MiCA (Crypto-Asset Operators). That latter category may include non-EU entities which only provide services to EU customers on a reverse solicitation basis, or other already regulated entities who provide crypto products to customers.

Reportable Crypto-Assets include Crypto-Assets under MiCA, except for Central Bank Digital Currency (CBDC), Electronic Money, Electronic Money Token, or any crypto-asset for which the RCASP has adequately determined that it cannot be used for payment or investment purposes. CBDCs, e-money and e-money tokens are instead reportable under CRS.

CARF is widely drawn and is anticipated to apply to a broad range of blockchain use cases including cryptocurrency, stablecoins, decentralized finance (de-fi) transactions and certain non-fungible tokens (NFTs).

One notable aspect of the CARF and therefore the Commission’s proposals is that there is no requirement that reportable transactions are conducted on a public blockchain. As a result, recent developments on permissioned blockchains between banks, assets managers and other financial institutions are also within the scope of the proposed DAC8.

However, the legislative proposal also deviates from the CARF in some specific areas:

  1. Extraterritoriality – the scope of Crypto-Asset Service Providers includes non-EU entities with EU customers. Where an RCASP is not registered under MiCA or otherwise operating in the EU it will be required to register under DAC8 in a Member State in order to report EU clients.

    Where an RCASP reports in its home jurisdiction under the OECD CARF rules, it does not need to report in the EU. This mechanism for managing extra-EU reporting and ensuring a level playing field is consistent with the DAC7 rules which apply to digital platforms.

  2. Requirement to prevent transactions – where a customer does not provide the required information after 60 days, an RCASP is required to take steps to prevent the customer from conducting further transactions. While a proposal to freeze assets was included in the initial OECD consultation for CARF, this was not included in the final adopted CARF.

The Commission's Q&A document indicates that both domestic and cross-border transactions are in scope of reporting, and indicates that small- and medium-sized enterprises will benefit from a single regime, rather than a range of regimes. However, DAC8 adopts the same construction as CRS, with reporting limited to “Member State Persons” being individuals or entities which are "resident in any other Member States."

Amendments to the Common Reporting Standard, DAC2

The legislative proposal will incorporate the OECD’s amendments to the CRS published by the OECD into the DAC without any notable differences.

The amendments cover three main areas:

  1. The addition of e-money products and CBDCs to the scope of CRS reporting. Clari?cations are also made to manage the interactions between the CARF and the CRS, aiming to harmonize the reporting burdens for Financial Institutions also considered as RCASPs.

  2. Changes to improve compliance for institutions already in scope of the CRS: these changes include precisions to the existing requirements, con?rmation of self-certi?cation through a reasonableness test, especially about the due diligence and alignment with Anti-Money Laundering rules as well as any information known and related to the account holder.

  3. Extension of reportable information: new ?elds are mandatory in the annual reports. It includes a ?ag for new and pre-existing accounts, a ?ag for accounts without a valid self-certi?cation, additional information on joint accounts, the obligation to report the role of controlling persons and the type of ?nancial account.

E-money institutions will likely be relieved to see that the EU has not deviated from the OECD proposals in the same way as it has for CARF. As a result, e-money will be subject to the same rules as banking – with no requirement to freeze accounts, or to report on domestic clients.

Consequential amendments will be needed to the EU xml schema to give effect to the reporting changes set out in the OECD amendments. The DAC already notes that Member States may rely on the OECD commentary to assist with the interpretation of DAC2, and therefore the changes to the OECD commentary are automatically included in the DAC, subject to any requirements to amend local law.

Other amendments to the DAC

Use of exchanged information in non-tax areas

The Commission sees a need to allow for a broader use of the tax information exchanged under the Directive in other areas. In this light, the proposal includes amendments to the rules that allow for the use for purposes other than taxation, but with specific conditions. As a specific use-case, the draft rules mention the sharing of information with the authorities in charge of restrictive measures (EU sanctions).

Minimum penalties for non-compliance based on turnover

The Commission proposed to amend the DAC to set minimum penalties for non-compliance across a number of the DAC requirements.

For DAC2, DAC6, DAC7 and DAC8, it is proposed to set the penalties at a minimum of €150,000 for entities with a turnover of more than €6 million. Those minimum penalties would apply where there has been a failure to comply with the requirements of the Directive that results in more than 25% of the information that should have been reported being incorrect, false, or missing.

In addition, all Member States are required to define whether their penalty regimes apply at an individual level (i.e., on a per error basis) or a cumulative level. The 25% error penalties above are cumulative – i.e., a single penalty for a significant failure of compliance. This has been an increasing area of focus in the wake of the OECD’s publication of the CRS Peer Reviews in November.

Extension of the communication on advance cross-border ruling to high net-worth individuals

The proposal extends the provisions for the automatic exchange of information on advance cross-border rulings to high net-worth individuals, defined as an individual that holds at least €1 million in financial or investable wealth or assets under management, excluding primary private residences (at any time during the calendar year for which the exchange takes place).

Under this proposed amendment, the competent authorities of the Member States should exchange information, by automatic exchange, on advance cross-border rulings for high net-worth individuals issued, amended, or renewed: (i) after 31 December 2023; and (ii) within a period beginning five years before 1 January 2026 in accordance with the applicable practical arrangements.

Advance cross-border rulings for high-net-worth individuals issued, amended, or renewed between 1 January 2020 and 31 December 2025 should be subject to such communication if they were still valid on 1 January 2026.

TIN validation at country level, and a E.U-wide TIN validation tool

The Commission also proposes amendments to DAC aimed at enhancing the collection of TINs, which again has been a key focus since the publication of the OECD’s Peer Reviews. This includes a focus on making TINs mandatory for all DAC reporting, and a requirement for the Commission to develop a TIN validation tool for Member States.

Next Steps

The proposal of the Commission will now follow the special legislative procedure for taxation matters, requiring consultation with the European Parliament, and unanimous agreement of all 27 EU Member States in Council.

Following the formal adoption of DAC8 by the Council, Member States will have until 31 December 2025 to transpose the main rules into national law. The new provisions will apply as of 1 January 2026. Two exceptions apply: (i) the provisions related to identification services should be transposed into national law by 1 January 2024 and applicable as of 1 January 2025; and (ii) the provisions related to TIN validation should be transposed into national law by 31 December 2027 and applicable as of 1 January 2028.


The proposed amendments underline the intention of the EU to address the challenges brought by the increasing use of crypto-assets for investment purposes. This proposal aims at increasing the tax transparency on crypto-assets which are held at exchanges and other crypto-asset services which are outside the country of the taxpayer.

The proposed timeline for the proposed rules to apply provides welcome relief for cryptocurrency and e-money institutions compared to earlier adoption dates in either 2024 or 2025. Given that most affected institutions will be applying these rules for the first time, this also gives the opportunity for domestic tax authorities to fully transpose the Directive into local law and allow time for affected intermediaries to implement the rules.

However, organizations in scope should monitor the adoption of the Directive proposal, as changes including on the first application date may be considered during the negotiations. In any case, all potentially affected organizations should initiate a timely assessment of required changes in customer onboarding and communication processes, as well as compliance and operations processes.


For additional information with respect to this Alert, please contact the following:

Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Berlin
  • Petar Groseta

  • Andreas Bolik

  • Florian Zawodsky

  • Rico Zischka

Ernst & Young Belastingadviseurs LLP, Rotterdam
  • Marlies de Ruiter
  • Maikel Evers
Ernst & Young Belastingadviseurs LLP, Amsterdam
  • Dennis Post
  • Lu-Shen Qua
Ernst & Young LLP, Oslo
  • Magnus Jones
  • Ingebjørg Brekka
Ernst & Young SA, Porto
  • Mariana Lemos
Ernst & Young LLP (United Kingdom), London
  • David Wren
  • Abi Jeffreys

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.