It is no secret that tax fraud, tax evasion and tax avoidance represent a major challenge both at an EU and an international level.
Fair taxation and fighting tax fraud, evasion and avoidance have become crucial items on the EU’s agenda. Closer administrative cooperation and extended exchange of information between Member States are considered key in fighting against harmful tax practices.
The European Council adopted a directive (DAC 8) amending EU rules (Directive 2011/16/EU). This amendment mainly concerns the reporting and automatic exchange of information on revenues from transactions in crypto assets and on advance tax rulings for high-net-worth individuals (HNWI).
What are some of the key objectives of this Directive?
To strengthen the current provisions in the current Directive dealing with administrative cooperation in the field of taxation;
To widen the scope to cover additional categories of assets and income (including crypto assets that have been issued in a decentralised manner, stablecoins, e-money tokens and certain non-fungible tokens (NFTs));
To extend the scope of the automatic exchange of information regarding advance cross-border rulings to certain rulings for HNWI, and provisions on automatic exchange of information on non-custodial dividends and similar revenues; and
To improve the rules on reporting and communication of Tax Identification Numbers (TINs).
What does this mean?
Crypto asset service providers will now be required to provide information on transactions of crypto-assets and e-money (including information on the payer and the payee of such transactions) to tax authorities – and this reporting obligation covers both cross-border and domestic transactions. Traceability of transfers of crypto assets will therefore be made easier.
Advance cross-border rulings that determine a person’s tax residence in the Member State that is issuing the ruling will be exchanged automatically.
Tax Identification Numbers (TIN) of both individuals and entities (issued by the Member State of residence) will be reported concerning certain items of income - including income from employment, director’s fees and pensions, advance cross-border rulings and advance pricing arrangements, country-by-country reports and reportable cross-border arrangements.
This facilitates the task of tax authorities to identify the relevant taxpayers and correctly assess the related taxes.
How can we help?
The incidence of tax enquiries and/or investigations stemming from the exchange of information is on the rise and therefore ensuring that you are compliant and in line with the various rules and regulations is key. The strategy of hoping or assuming that tax authorities will not find out is no longer an option.
Our multidisciplinary teams can help you identify any relevant tax implications that may arise on various transactions and guide you on the obligations you may need to satisfy before it’s too late, with the ultimate aim of avoiding hefty fines, penalties and sleepless nights down the line.
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