​European Commission proposes to oblige crypto companies to disclose data on client transactions

Companies offering crypto services to residents of the European Union will need to comply with tax reporting rules to close tax evasion gaps.

A new proposal from the European Commission will require crypto asset service providers of all sizes and geographical locations to report on the transactions of EU-based clients to tax authorities.

“Tax authorities currently lack the necessary information to monitor proceeds obtained by using crypto-assets, which are easily traded across borders,” the European Commission wrote in a statement. “This severely limits their ability to ensure that taxes are effectively paid, which means European citizens lose important tax revenues.”

The gap in expected and collected tax on taxable goods and services within the bloc was €93 billion ($98 billion) in 2020, according to statistics released by the Commission. That makes up 9.1% of the total expected revenue. Collecting taxation on crypto activity in the EU could bolster an additional €2.4 billion ($2.5 billion) of revenue, The Block reported earlier this week.

The scope of the legislation covers crypto assets “issued in a decentralized manner,” including stablecoins and non-fungible tokens. The Commission also suggested monitoring the cross-border activity of high-net-worth individuals as means to expand the data used by tax authorities to prevent opportunities to hide wealth from tax officials.

Now, the proposal will make its way onto the desks of policymakers in the European Parliament. A stamp of unanimous approval from state representatives in the European Council will also be needed before new rules come into force. The European Commission is hoping for enforcement starting in 2026.

The crypto tax reporting proposal, formally the eighth in a series of directives on administrative cooperation, sits in the EU’s 2020 package of 25 initiatives to adapt the process of taxation to new technologies. DAC8 forms another pillar of the EU’s growing crypto-asset legislation, alongside the framework in the Markets in Crypto-Assets regulation and anti-money laundering rules.

This material is taken from the website https://www.theblock.co.