New EU rules give the tax authorities more insight into crypto

There was a time when many crypto investors thought that Bitcoin (BTC) and other coins remained out of sight of the tax authorities. That idea has been outdated for some time and with the new DAC8 rules, the Tax Authorities can now check much more easily whether your digital coins are properly included in your tax return.

DAC8 aligns crypto with banks

DAC8 is the eighth amendment to a European directive for cooperation between tax authorities.

It stands for Directive on Administrative Cooperation 8. The earlier versions mainly concerned the exchange of data from banks and financial institutions. Think of savings, investment accounts and foreign bank accounts. DAC8 adds crypto to this.

The European Commission proposed the law at the end of 2022 and all EU member states gave the green light in October 2023. Since this year, crypto platforms have been required to collect data from their users.

This concerns information such as name, address, tax country, transactions and the value of crypto assets. Buying and selling moments are also registered.

In practice, crypto coins are treated like traditional financial products. Governments want to prevent assets via crypto from remaining out of sight of the tax authorities.

Exchanges need to collect data

The new rules mainly target crypto companies. Exchanges, brokers and wallet providers will be required from 2026 to record extensive data about their customers.

Platforms must, among other things, check where a user is liable for tax. In many cases, customers must therefore complete a declaration stating their country of tax residence.

Anyone who ignores such a request may ultimately run into problems. Exchanges may block accounts if users do not provide information after multiple reminders.

There are also serious sanctions at stake for companies themselves. Platforms that do not comply with the reporting obligation risk high fines and may even lose their activities.

The tax authorities will soon be watching

The data does not just disappear in the administration of crypto platforms. From 2027, the first datasets will be automatically forwarded to national tax authorities.

European countries then share that information among themselves. For example, if you use a foreign exchange, the Dutch tax authorities can still receive that information.

For users, little will formally change in the tax rules. In the Netherlands, crypto falls under box 3, where tax is paid on capital. Since March 1, Dutch people have been able to file tax returns again and in this article you can read how much tax you may have to pay.

The big difference is in the control. Where the tax authorities previously had to rely largely on what investors themselves reported, the government now receives direct data from crypto platforms.

Proponents see this as a necessary step for a mature crypto market. Critics fear that the original promise of privacy in crypto is increasingly disappearing.