EU Crypto, NFT Providers Must Report Tax Details Under Leaked EU Plan
A draft bill seen by CoinDesk also covers stablecoins, derivatives and companies outside the bloc.
Crypto providers will have to report details of their European Union clients’ transactions to national tax authorities within the bloc, under a bill set to be proposed by the European Commission next week.
The new law, inspired by international standards designed to curb crypto tax evasion, could also apply to stablecoins, derivatives and non-fungible tokens (NFT), and force even non-EU based crypto providers to register within the bloc, the document reveals.
“The obligation to report income earned through crypto-asset investments and the exchange of such information will help Member States receive a full set of information in order to collect tax revenues due,” said a draft of the document proposing the bill seen by CoinDesk.
Existing tax rules known as the Directive on Administrative Cooperation seek to avoid people stashing money in foreign bank accounts to avoid taxation – but officials are now concerned that crypto accounts provide an escape route.
The move is also needed to better enforce financial blocks placed on Russia, the document added, citing fears that “crypto-assets could be used as a means of avoiding sanctions” which focus on more traditional assets.
Under the plans, crypto asset providers would have to collect and verify information about their users such as names, addresses, social security numbers and dates of birth, which would then be sent to the tax authorities in the user’s country of tax residence.
The rules would extend beyond an existing crypto-asset law known as MiCA, covering companies offering non-fungible tokens (NFT), and foreign companies that have incidental clients within the bloc.
“Such crypto-asset service providers have to register in a Member State” of the EU, the document said, adding that “limiting the scope solely to EU-based crypto-asset service providers could significantly decrease the tax revenues of each option.”
MiCA, in contrast, requires EU-based cryptocurrency companies to register and have minimum governance norms, but carves out other Web 3 innovations such as NFTs. Total IT and other startup costs for implementing the measures will amount to hundreds of millions of euros, borne by crypto providers and tax administrations, the document said.
“The Directive applies to both centralized and decentralized platforms as well as small or recently established businesses,” the bill said.
“The definition of crypto assets is very general and targets as well those assets that can be held and transferred in a decentralized manner, without the intervention of traditional financial intermediaries, including stablecoins, derivatives issued in the form of a crypto asset and certain non-fungible tokens,” the document said, with providers urged to consider case-by-case whether NFTs are used for payment or investment purposes.
The document says the commission was “inspired” by work at the OECD, a club of developed countries that has developed norms for tax administrations to share crypto data, and follows EU measures designed to curb money laundering using crypto.
The EU tax bill is scheduled for approval at a Dec. 7 commission meeting.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.