14.11.2024Government publishes first draft of DAC 8 implementation law
Draft law would implement tax transparency rules for crypto-asset transactions as described in the EU directive into domestic tax law
On 25 October 2024, the German Ministry of Finance (MOF) published a first draft of a law implementing into domestic law Council Directive (EU) 2023/2226 (“DAC 8”). The core of the draft law consists of the Crypto Asset Tax Transparency Act, which would introduce a new reporting standard for crypto asset transactions. The draft law also includes an extension of the Common Reporting Standard (CRS) to include new digital financial products (“amended CRS”). In addition, the draft law includes an update of the Platform Tax Transparency Act, which was introduced in 2022 as a result of Council Directive (EU) 2021/514) (“DAC 7”). A consultation period on the draft law is open until 14 November 2024.
DAC 8, which was approved by the European Council in October 2023, introduced rules that provide for the reporting and exchange of information for tax purposes on electronic money and crypto assets, the information exchange related to cross-border rulings concerning high net worth individuals, and penalties and compliance measures for the various reporting obligations under the DAC framework. EU member states must implement into domestic law the main rules of DAC 8 by 31 December 2025, with the rules applying as from 1 January 2026. However, several parts of DAC 8, such as the tax information number reporting system, need only be implemented by the end of 2027 (or 2029). The draft law covers only the provisions of DAC 8 that require implementation by 31 December 2025 and apply as from 1 January 2026.
The Crypto Asset Tax Transparency Act in the draft law would introduce extensive recording, due diligence, and reporting obligations for providers of crypto services. Similar to the Platform Tax Transparency Act, additional tax transparency would be introduced in the area of crypto assets. Information about transactions carried out by users of crypto assets would be required to be reported by providers of crypto services. This would apply, among other things, to exchanges of crypto assets for fiat money (e.g., euros) and to transfers of crypto assets. The first reporting period would be calendar year 2026. The draft law is largely silent on technical details of how the annual report would have to be submitted.
As a result of the amended CRS in the draft law, reporting obligations for financial accounts as described in the Financial Accounts Information Exchange Act would also apply to electronic money products. Derivatives and investment companies that invest in crypto assets would also be subject to the reporting obligations under the amended CRS. The definitions of financial assets and investment companies for purposes of the reporting obligations would be adjusted; as a result, crypto asset derivatives held in financial accounts and investment companies with crypto asset investments would be subject to the broadened reporting rules. In addition, the draft law contains specifications regarding implementation of the information exchange with tax authorities in third countries, resulting from the Multilateral Competent Authority Agreements for the Crypto-Asset Reporting Framework and the CRS.
Due to the current government crisis in Germany and the looming snap elections (early) next year, the timing of the legislative process is currently unknown. It can, however, be expected that the draft law would be implemented into domestic law before the 31 December 2025 deadline.
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