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B Law & Tax
25 May 2023

Tax advisor: Tax cooperation in the European Union for cryptocurrencies and high net worth assets

The Council has reached an agreement on its position on amendments to the Directive on administrative cooperation in tax matters. These amendments mainly focus on the reporting and automatic exchange of information on income derived from cryptocurrency transactions, as well as on the disclosure of information on previous tax rulings for high net worth individuals. The aim is to strengthen the existing legislative framework by expanding the scope of registration and reporting obligations, as well as to promote administrative cooperation between tax authorities in general.

With the amendments to the Directive on administrative cooperation in tax matters, the coverage will be extended to include other categories of assets and income, such as cryptoassets. A mandatory automatic exchange of information between tax authorities will be established, whereby cryptoasset service providers will be required to submit such information. Until now, Member States’ tax administrations have had difficulties in complying with tax obligations due to the decentralized nature of cryptoassets. Due to the inherent cross-border nature of cryptoassets, close administrative cooperation at the international level is required to ensure tax collection.

The Directive will cover a wide range of cryptoassets, based on the definitions set out in the Regulation on cryptoasset markets. This will include both decentrally issued cryptoassets and stable currencies, comprising electronic money tokens and certain types of non-fungible tokens.

Context of this agreement

On 27 November 2020, the Council issued conclusions on the need to establish fair and effective taxation in the context of the recovery, addressing tax challenges related to digitalization and promoting good tax governance both in the EU and globally. The Council recognizes that the rapid development and increasingly widespread use of alternative means of payment and investment, such as crypto-assets and e-money, may compromise the progress made in terms of tax transparency in recent years, and pose significant risks of tax fraud, as well as tax evasion and avoidance. It is therefore crucial to discuss at a technical level how to update the rules for administrative cooperation both within the EU and internationally, in order to adequately address these potential risks. The Council noted in a report that it expected a legislative proposal from the Commission on the revision of the Directive on administrative cooperation in tax matters, in relation to the exchange of information on cryptoassets and prior tax arrangements with high net worth individuals. Subsequently, the Commission presented a proposal for a Council Directive, referred to as DAC 8, to amend the Directive on administrative cooperation in tax matters.

The current Directive does not follow the usual legislative procedure, but the consultation procedure. This means that the European Parliament can express its opinion, but has no legislative power to make changes to the proposal. The final decision on the outcome of this legislative process rests with the Member States, who take the decision unanimously in the Council.

B Law & Tax International Tax & Legal Advisors.


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