The Council of the European Union has made significant progress in its ongoing efforts to enhance tax transparency and combat tax evasion. During the recent meeting of the Economic and Financial Affairs Council (“ECOFIN”), a milestone agreement was reached on the DAC8 Directive, which focuses on enhancing tax cooperation. This newsletter provides an overview of the key provisions of the DAC8 Directive.
1. Reporting obligations for crypto-asset service providers
The DAC8 Directive encompasses a range of measures aimed at promoting transparency and closing loopholes that could facilitate tax evasion and tax avoidance. One of its primary objectives is to expand the scope of reporting obligations for crypto-asset service providers operating within the EU. Under the directive, they will be required to report to the competent authority transactions involving the crypto-assets of their EU resident clients. The Compromise Text defines crypto-assets very broadly, and includes crypto-assets issued in a decentralised manner, as well as stablecoins, e-money tokens, and certain non-fungible tokens (NFTs).
2. Automatic exchange of information on advance cross-border rulings
In addition to crypto-assets, the DAC8 Directive addresses the automatic exchange of information on advance cross-border rulings concerning individuals. In this context, it foresees the exchange of information pertaining to rulings issued, amended or renewed after 1 January 2026 and reporting obligations for tax rulings which:
- Involve transactions exceeding EUR 1.5 million (or the amount equivalent in any other currency) if such amount is referred to in the ruling; or
- Determine whether a person is or is not resident for tax purposes in the EU Member State (“EU MS”) issuing the ruling.
3. Broadening the list of income subject to the automatic exchange of information
The Compromise Text specifies that the competent authority of each EU MS shall communicate to the respective competent authority of any other EU MS all information available concerning residents of that EU MS, on the following categories of income: income from employment, director’s fees, income from life insurance products not covered by other EU legal instruments, pensions, ownership of and income from immovable property, royalties, and non-custodial dividend income.
Non-custodial dividend income refers to dividends or income treated as dividends in the payer’s EU MS, which are paid to a non-custodial account.
In accordance with the Compromise Text, before 1 January 2026, each EU MS shall inform the European Commission of at least five categories of covered income (mentioned above) that will be subject to automatic exchange with the competent authority of any other EU MS‘s residents acquiring such income.
4. Compliance and penalties
The Compromise Text states that EU MS shall lay down rules pertaining to infringements of national law provisions adopted pursuant to the DAC8 Directive. Furthermore, it specifies that the penalties adopted shall be effective, proportionate, and dissuasive. The choice of such measures remains within the discretion of each MS.
5. Our observations
In order for DAC8 to be formally adopted, the Council of the European Union should unanimously approve it. Following this, the MS will have until the end of 2025 to transpose its rules into national law. Most of the provisions are planned to come into effect on 1 January 2026.
The political agreement reached by the ECOFIN on the Compromise Text is a significant step toward introducing tax transparency rules for crypto-assets. As it progresses through the legislative process, financial institutions and organisations should prepare for the changes and begin assessing the impact on their operations.
Should you be in need of assistance regarding DAC8 and its impact on your business, please contact the Tax team at Grant Thornton Luxembourg.
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