Regulating and reporting crypto asset transactions

Crypto asset tax reporting

On 16 May 2023 the Council of the EU adopted the eighth iteration (‘DAC8’) to the Directive on Administrative Cooperation in the field of taxation (‘DAC’). Apart from including electronic money within the scope of the Directive, DAC8 requires EU and non EU crypto asset custodians, administrators, trading platform operators, exchanges and advisors who have EU resident clients to register themselves on the EU’s Crypto Asset Operator Register and collect, verify and disclose information on domestic and cross border reportable crypto exchanges and transfers.

The information collected by local tax administrations would be automatically exchanged intra EU as well as with specific third countries in terms of effective qualifying competent authority agreements. DAC8 will coexist in parallel to the OECD’s Crypto Asset Reporting Framework (‘CARF’) and refers to the respective OECD Commentaries as interpretative aides.

CESOP information collection and reporting

The information required to be reported through CESOP shall be collected and reported electronically to the CfR via a dedicated online portal every calendar quarter within one month. Accordingly, the first CESOP filing period will cover reportable payments made during Q1 2024, with qualifying banks and PSPs required to make the requisite CESOP filings by no later than 30 April 2024.

We understand the Malta CESOP portal is expected to be launched during the last quarter of 2023. No extensions to filing deadlines are currently foreseen, with the European Commission invariably indicating that qualifying banks and PSPs are expected to be fully CESOP-compliant within the set timeframes.

Crypto asset regulatory framework

At the same meeting, the Council of the EU adopted the Markets in Crypto Assets Regulation (‘MiCA’), introducing a harmonised EU framework with the aim of enhancing investor protection without stifling innovation in the crypto asset sector. The Council also adopted a recast of the Transfer of Funds Regulation (‘TFR’) which requires appending information to crypto asset transfers to improve traceability. The three legislative acts collectively refer to a homogeneous definition of crypto assets for consistency and uniformity.

Exchange of rulings involving individuals

DAC8 also extends automatic exchange of information to advance cross border rulings involving individuals that are issued, amended or renewed from 2026, where said rulings refer to transactions exceeding €1,500,000 or where such rulings include a determination of tax residence in the issuing Member State.

Amendment to DAC6 notifications by exempt intermediaries

In its decision of 8 December 2022, the Court of Justice of the EU (‘CJEU’) in the case of Orde van Vlaamse Balies and others (C-694/20) confirmed that the obligation of lawyers acting as intermediaries and bound by legal professional privilege to notify any other intermediary, not being a client, of the latter’s reporting obligations under DAC6 infringes the right to respect for communications between lawyers and their clients under Article 7 of the Charter of Fundamental Rights of the EU. DAC8 consequently narrowed the notification requirement to clients (whether in their capacity as an intermediary or a taxpayer) of an intermediary subject to professional secrecy under national law.

Timeline

Save a few derogations, Member States must implement DAC8 by 31 December 2025 and information is to be reported for the relevant calendar year as from 1 January 2026.

Timeline

Save a few derogations, Member States must implement DAC8 by 31 December 2025 and information is to be reported for the relevant calendar year as from 1 January 2026.

Deloitte view

The adopted legislative texts introduce EU regulation and tax disclosure of crypto asset transactions in a harmonised, standardised and allegedly simplified manner. We expect this development to necessitate a review of Malta’s Virtual Financial Asset framework and enhance tax compliance, in turn requiring relevant organisations to assess the combined governance and business impact.

Apart from the above amendments, it is worth noting that DAC8 necessitates the disclosure of Tax Identification Numbers (TIN) with information exchanged under the Directive to enhance the identification of taxpayers.

The Council of the EU’s official press release on DAC8 may be accessed here.
The Council of the EU’s official press release on MiCA may be accessed here.