Directive (EU) 2023/2226 of the Council, published in the Official Journal of the European Union on October 24, 2023, amends Directive 2011/16/EU on administrative cooperation in tax matters. According to this Directive, Member States must adapt their legislation to comply with its provisions by no later than December 31, 2025, and these provisions will come into effect on January 1, 2026, although longer deadlines are established for certain aspects.
The aim of this modification is to adapt to changing market conditions and combat tax fraud, evasion, and avoidance. Provisions related to the communication and exchange of information are strengthened, incorporating the latest amendments to the OECD Common Reporting Standard. These include the integration of provisions regarding electronic money and digital currencies issued by central banks according to the OECD’s Common Reporting Standard for Crypto Assets. Furthermore, the scope of automatic information exchange in relation to cross-border advance agreements concerning individuals is expanded.
To ensure consistency in the implementation in Member States, they are required to use the Model Agreement Comments and the Common Reporting Standard as sources of guidance and interpretation when applying the latest amendments to the Common Reporting Standard.
Within the actions contemplated in this Directive, the following ten are included:
- The Directive establishes the obligation to report information about digital assets used for payment or investment purposes, with some exceptions provided in Regulation (EU) 2023/1114. Digital asset service providers must assess on a case-by-case basis whether these assets cannot be used for payment or investment. To enable tax authorities to analyze and use this information, segmented communication and information exchange requirements are established for each digital asset with which users have transacted. Digital asset operators not subject to Regulation (EU) 2023/1114 but required to report information about Union residents must register in a single Member State to fulfill their reporting obligations.
- The Directive requires each Member State to establish measures for the communication of the Tax Identification Number (TIN) concerning various types of income and cross-border tax agreements. These measures must include the introduction of TIN reporting obligations in national legislation. However, it is recognized that there may be exceptional situations in which it is not possible to obtain and report the taxpayer’s TIN.
- It establishes regulations to ensure that information reporting responsibilities extend to the use of electronic money.
- It determines that uncustodied dividend income must be categorized within the sources of income subject to automatic information exchange.
- The Directive imposes on Member States the obligation to require the reporting of the Tax Identification Number (TIN) in relation to various types of income and cross-border tax agreements. This measure aims to ensure transparency in financial information reporting. However, it is acknowledged that in exceptional cases, the entity or person reporting information may face difficulties in obtaining and reporting the taxpayer’s TIN.
- Each Member State must include the Tax Identification Number (TIN) issued by the competent authority of the State of residence in exchanges related to cross-border tax agreements, country-by-country reports, and cross-border mechanisms subject to information reporting. This is to ensure transparency in the exchange of tax data.
- Automatic information exchange on cross-border tax agreements must be expanded to include these agreements when the transaction amount or series of transactions exceeds a specific threshold.
- It specifies that data shared between Member States must also be usable for the determination, management, and enforcement of customs duties.
- To ensure compliance with the Directive’s regulations, Member States must establish sanctions applicable to breaches of national rules related to automatic information exchange by crypto asset service providers. These sanctions must be effective, proportionate, and dissuasive, and are left to the discretion of the Member States. The goal is to ensure proper compliance with the rules and promote transparency in the reporting of financial data related to crypto assets.
- Directive 2011/16/EU has been modified as a result of a judgment from the Court of Justice of the European Union (CJEU) dated December 8, 2022 (case C-694/20, ECLI:EU:C:2022:963). This modification removes the obligation of intermediary lawyers, who are exempt from reporting information due to attorney-client privilege, to inform other non-client intermediaries about their reporting obligations. However, exempt intermediaries still must inform their clients about their reporting obligations. The modification aims to clarify responsibilities regarding financial information reporting.
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