The European Union (EU) has put forward the DAC8 proposal, aimed at enhancing the detection and prevention of tax fraud, evasion, and avoidance. This legislative initiative aims to improve the ability of member states to combat these financial crimes. Additionally, the Organization for Economic Co-operation and Development (OECD) is working on a global crypto-asset reporting framework (CARF). These measures reflect the growing importance of regulating digital assets in the modern economy.
The EU's DAC8 proposal strengthens tax enforcement and reporting in the digital economy.
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Author: Kristina Dosen
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Content accuracy validation date:
19.05.2023
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One of the key aspects of the DAC8 proposal is the requirement for all reporting crypto-asset service providers, regardless of size or location, to report the transactions of clients residing in the EU. This reporting obligation encompasses both domestic and cross-border transactions, ensuring comprehensive oversight of crypto-asset activities. Notably, the proposal also covers non-fungible tokens (NFTs), acknowledging their increasing popularity and potential for misuse.
The DAC8 proposal expands reporting obligations to include financial institutions reporting on e-money and central bank digital currencies. By involving these institutions, authorities aim to strengthen the monitoring of financial transactions and prevent potential tax evasion facilitated by new forms of digital currency. This broadened scope reflects the need to keep pace with evolving financial technologies.
To enhance tax transparency among high net-worth individuals, the DAC8 proposal extends the scope of the automatic exchange of advance cross-border rulings. This provision applies to individuals with a minimum of €1 million in financial or investable wealth or assets under management, excluding their primary residence. Member States will exchange information on advance cross-border rulings issued, amended, or renewed between January 1, 2020, and December 31, 2025. This exchange facilitates scrutiny of tax arrangements, ensures compliance, and prevents abusive practices.
The DAC8 proposal seeks to establish a common minimum level of penalties for the most serious cases of non-compliance, such as a complete absence of reporting despite administrative reminders. This standardization ensures that tax evaders face appropriate consequences, regardless of the member state involved. By imposing consistent penalties, the proposal aims to deter non-compliant behavior and foster a fair and transparent tax environment.
In parallel with the EU's DAC8 proposal, the OECD is developing the Crypto-Asset Reporting Framework (CARF). This initiative aims to create a global framework for reporting crypto-assets, promoting transparency and accountability in the rapidly expanding digital asset market. The CARF will complement the EU's efforts and contribute to consistent reporting practices on a global scale.
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