EU on administrative cooperation in the field of taxation - Main contents

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dossier	COM(2022)707 - Amendment of Directive 2011/16/EU on administrative cooperation in the field of taxation.
document	COM(2022)707
date	October 17, 2023

(1) Tax fraud, tax evasion and tax avoidance represent a major challenge for the Union and at global level. Exchange of information is pivotal in the fight against such practices.

(2) The European Parliament has stressed the political importance of fair taxation and of fighting tax fraud, tax evasion and tax avoidance, including through greater administrative cooperation and exchange of information between Member States.

(3) On 1 December 2021 the European Council approved a report from the Council (Ecofin) requesting the European Commission to table in 2022 a legislative proposal containing further revisions to Council Directive 2011/16/EU ²⁴ , concerning exchange of information on crypto-assets and tax rulings for wealthy individuals. ²⁵

(4) The European Court of Auditors published a report examining the legal framework and implementation of the Directive. That report concludes that the overall framework of Directive 2011/16/EU is solid, but that some provisions need to be strengthened in order to ensure that the full potential of the exchange of information is exploited and the effectiveness of the automatic exchange of information is measured. The report furthermore concludes that the scope of the Directive should be enlarged in order to cover additional categories of assets and income, such as crypto-assets.

(5) The crypto-asset market has gained in importance and increased its capitalisation substantially and rapidly over the last 10 years. Crypto-assets are a digital representation of a value or of a right, which is able to be transferred and stored electronically, using distributed ledger technology or similar technology.

(6) Member States have rules and guidance in place, albeit different across Member States, to tax income derived from crypto-asset transactions. However, the decentralised nature of crypto-assets makes it difficult for Member States’ tax administrations to ensure tax compliance.

(7) Regulation XXX on Markets in Crypto-assets of the European Parliament and the Council ²⁶ (the Regulation XXX) has expanded the Union regulatory perimeter to issues of crypto-assets that had so far not been regulated by Union financial services acts as well as providers of services in relation to such crypto-assets (‘crypto-asset service providers’). The Regulation XXX sets out definitions that are used for the purposes of this Directive. This Directive also takes into account the authorisation requirement for crypto-asset service providers under Regulation XXX in order to minimise administrative burden for the crypto-asset service providers. The inherent cross-border nature of crypto-assets requires strong international administrative cooperation to ensure effective regulation.

(8) The Union’s Anti-Money Laundering/Countering the Financing of Terrorism framework (AML/CFT) extends the scope of obliged entities subject to AML/CFT rules, to crypto-asset service providers regulated by Regulation XXX. In addition, the Regulation XXX ²⁷ extends the obligation of payment service providers to accompany transfers of funds with information on the payer and payee to crypto-assets services providers to ensure the traceability of transfers of crypto-assets for purpose of fighting against money laundering and terrorism financing.

(9) At international level, the Organisation for Economic Co-operation and Development (OECD) Crypto-Asset Reporting Framework ²⁸ aims at introducing greater tax transparency on crypto-assets and its reporting. Union rules should take into account the framework developed by the OECD in order to increase effectiveness of information exchange and to reduce the administrative burden.

(10) Council Directive 2011/16/EU ²⁹ lays down obligations for financial intermediaries to report financial account information to tax administrations that are then required to exchange this information with other relevant Member States. However, most crypto-assets are not obliged to be reported under that Directive because they do not constitute money held in a depository accounts nor in financial assets. In addition, crypto-asset service providers as well as crypto-asset operators are in most cases not covered by the existing definition of financial institutions under Directive 2011/16/EU.

(11) In order to address new challenges arising from the growing use of alternative means of payment and investment, which pose new risks of tax evasion and are not yet covered by Directive 2011/16/EU, the rules on reporting and exchange of information should cover crypto-assets and their users.

(12) In order to ensure the proper functioning of the internal market, the reporting should be both effective, simple and clearly defined. Detecting taxable events that occur while investing in crypto-assets is difficult. Reporting crypto-asset service providers are best placed to collect and verify the necessary information on their users. The administrative burden should be minimised for the industry so that it is able to develop its full potential within the Union.

(13) The automatic exchange of information between tax authorities is crucial to provide them with the necessary information to enable them to correctly assess the amounts of income taxes due. The reporting obligation should cover both cross-border and domestic transactions, in order to ensure the effectiveness of the reporting rules, the proper functioning of the Internal Market, a level playing field and respect of the principle of non-discrimination.

(14) The Directive applies to crypto-assets service providers regulated by and authorised under Regulation XXX and to crypto-asset operators that are not. Both are referred to as reporting crypto-asset service providers as they are required to report under this Directive. The general understanding of what constitutes crypto-assets is very broad and includes those crypto-assets that have been issued in a decentralised manner, as well as stablecoins, and certain non-fungible tokens (NFTs). Crypto-assets that are used for payment or investment purposes are reportable under this Directive. Therefore, reporting crypto-asset service providers should consider on a case-by-case basis whether crypto-assets can be used for payment and investment purposes, taking into account the exemptions provided in Regulation XXX, in particular in relation to a limited network and certain utility tokens..

(15) In order to enable tax administrations to analyse the information they receive and to use it in accordance with national provisions, for example, for matching of information and valuation of assets and capital gains, it is appropriate to provide for the reporting and exchange of information that is sub-divided in relation to each crypto-asset with respect to which the crypto-asset user made transactions.

(16) In order to ensure uniform conditions for the implementation of provisions on automatic exchange of information between competent authorities, implementing powers should be conferred on the Commission to adopt practical arrangements necessary for the implementation of the mandatory automatic exchange of information reported by reporting crypto-asset service providers, including a standard form for the exchange of information. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council ³⁰ .

(17) Crypto-asset service providers covered by Regulation XXX may exercise their activity in the Union through passporting once they have received their authorisation in a Member State. For these purposes, ESMA holds a register with authorised crypto-asset service providers. Additionally, ESMA also maintains a blacklist of operators exercising crypto-asset services that require an authorisation under Regulation XXX.

(18) Crypto-asset operators that do not fall under the scope of that Regulation but are obliged to report information on the crypto-asset users resident in the EU pursuant to this Directive should be required to register and report in one single Member State for the purpose of complying with their reporting obligations.

(19) In order to foster administrative cooperation in this field with non-Union jurisdictions, crypto-asset operators that are situated in non-Union jurisdictions and provide services to EU crypto-asset users, such as NFT service-providers or operators providing services on a reverse-solicitation basis, should be allowed to solely report information on crypto-asset users resident in the Union to the tax authorities of a non-Union jurisdiction insofar as the reported information is correspondent to the information set out in this Directive and insofar as there is an effective exchange of information between the non-Union jurisdiction and a Member State. Crypto-asset service providers authorised under Regulation XXX could be exempt from reporting such information in the Member States where it is holding the authorisation if the correspondent reporting takes place in a non-Union Jurisdiction and insofar as there is an effective qualifying competent authority agreement in place. The qualified non-Union jurisdiction would in turn communicate such information to the tax administrations of those Member States where crypto-asset users are resident. Where appropriate, that mechanism should be enabled to prevent correspondent information from being reported and transmitted more than once.

(20) In order to ensure uniform conditions for the implementation of this Directive, implementing powers should be conferred on the Commission to determine whether information required to be exchanged pursuant to an agreement between the competent authorities of a Member State and a non-Union jurisdiction is correspondent to that specified in this Directive. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council. More specifically, the Commission should, by means of implementing acts determine whether information required to be exchanged pursuant to an agreement between the competent authorities of a Member State and a non-Union jurisdiction is correspondent to that specified in that Directive. Given that the conclusion of agreements with non-Union jurisdictions on administrative cooperation in the area of direct taxation remains within the competence of Member States, the Commission’s action could also be triggered by a request from a Member State. For that purpose, it is necessary that, following the request of a Member State, the determination of correspondence could also be made in advance of an envisaged conclusion of such an agreement. Where the exchange of such information is based on a multilateral competent authority agreement, the decision on correspondence should be taken in relation to the whole of the relevant framework covered by such a competent authority agreement. Nevertheless, it should still remain possible to take the decision on correspondence, where appropriate, concerning a bilateral competent authority agreement.

(21) Insofar as the international standard on the reporting and automatic exchange of information on crypto-assets, OECD’s Crypto-Asset Reporting Framework, is a minimum standard or equivalent, which establishes a minimum scope and content of jurisdictions’ implementation thereof, the determination of correspondence of this Directive and the OECD’s Crypto-Asset Reporting Framework by the Commission, by means of an implementing act, should not be required provided that there is an Effective Qualifying Competent Authority Agreement in place between the non-Union jurisdictions and all Member States.

(22) Although the G20 endorsed the OECD Crypto-Asset Reporting Framework and recommended its implementation, no decision has been taken yet on whether it would be considered as a minimum standard or equivalent. Pending this decision, the proposal includes two different approaches for determining correspondence.

(23) This Directive does not substitute any wider obligations arising from Regulation XXX.

(24) In order to foster convergence and promote consistent supervision with regard to Regulation XXX, national competent authorities should cooperate with other national competent authorities or institutions and share relevant information.

(25) The relieving of the registration and reporting obligation as provided for in this Directive which is dependent upon the determination of correspondent reporting and exchange mechanisms in relation to non-Union jurisdictions and Member States should only be understood to apply in the area of taxation especially for the purpose of this Directive and should not be conceived as a basis for recognising correspondence in other areas of EU law.

(26) It is crucial to reinforce the provisions of Directive 2011/16/EU concerning the information to be reported or exchanged to adapt to new developments of different markets and consequently effectively tackle identified conducts for tax fraud, tax avoidance and tax evasion. Those provisions should reflect the developments observed in the internal market and at international level leading to an effective reporting and exchange of information. Consequently, the Directive includes among others the latest additions to the Common Reporting Standard of the OECD, the integration of e-money and central bank digital currency provisions, a clear and harmonised framework for compliance measures, and the extention of the scope of cross-border rulings to high net worth individuals.

(27) E-money products, as defined by Directive 2009/110/EU of the European Parliament and of the Council ³¹ are frequently used in the Union and the volume of transactions, and their combined value increases steadily. E-money products are however not explicitly covered by Directive 2011/16/EU. Member States adopt diverse approaches to e-money. As a result, related products are not always covered by the existing categories of income and capital of Directive 2011/16/EU. Rules should therefore be introduced ensuring that reporting obligations apply to e-money and e-money tokens under Regulation XXX.

(28) In order to close loopholes that allow tax evasion, tax avoidance and tax fraud, Member States should be required to exchange information related to income derived from non-custodial dividends. Income from non-custodial dividends should therefore be included in the categories of income subject to mandatory automatic exchange of information.

(29) The Tax Identification Number (‘TIN’) is essential for Member States to match information received with data present in national databases. It increases Member States’ capability of identifying the relevant taxpayers and correctly assessing the related taxes. Therefore, it is important that Member States require that TIN is indicated in the context of exchanges related to financial accounts, advance cross-border rulings and advance pricing agreements, country-by-country reports, reportable cross-border arrangements, and information on sellers on digital platforms.

(30) The absence of exchange of rulings concerning high net worth individuals means that tax administrations may not be aware of those rulings., That situation risks creating opportunities for tax fraud, tax evasion and tax avoidance. Therefore, automatic exchange of advance cross-border rulings and advance pricing agreements should extend to situations where an advance cross-border ruling concerns tax affairs of high net worth individuals.

(31) In order to reap the benefits of the mandatory automatic exchange of advance cross-border rulings for high net worth individuals, it should extend to such advance cross-border rulings that were issued, amended or renewed between 1 January 2020 and 31 December 2025 and which are still valid on 1 January 2026.

(32) A number of Member States are expected to introduce identification services as a simplified and standardised means of identification of service providers and taxpayers. The Member States who wish to make use that format for identification should be allowed to do so provided that it does not affect the flow and quality of information of other Member States that do not use such identification services.

(33) It is important that, as a matter of principle, the information communicated under Directive 2011/16/EU is used for the assessment, administration and enforcement of taxes which are covered by the material scope of that Directive. While this was not precluded so far, uncertainties regarding the use of information have arisen due to unclear framework. Given the interlinks between tax fraud, evasion and avoidance and anti-money laundering and the synergies in terms of enforcement, it is appropriate to clarify that information communicated between Member States may also be used for the assessment, administration and enforcement customs duties and anti-money laundering and combating the financing of terrorism.

(34) Directive 2011/16/EU provides for the possibility to use the information exchanged for other purposes than for direct and indirect tax purposes to the extent that the sending Member State has stated the purpose allowed for the use of such information in a list. However, the procedure for such use is cumbersome as the sending Member State need to be consulted before the receiving Member State can use the information for other purposes. Removing the requirement for such consultation should alleviate the administrative burden and allow swift action from tax authorities when needed. It should therefore not be required to consult the sending Member State where the intended use of information is covered in a list drafted beforehand by the sending Member State.

(35) Considering the amount and the nature of the information collected and exchanged on the basis of Directive 2011/16/EU as amended, it can be useful in other areas than taxation. While the use of this information in other areas should as a general rule be restricted to areas approved by the sending Member State in accordance with the provisions of this Directive there is a need to allow for a broader use of the information in situations presenting particular and serious characteristics and where it has been agreed within at Union level to take action. Such situations would in particular be those where decisions have been taken pursuant to Article 215 of the Treaty on the Functioning of the European Union regarding restrictive measures. Indeed, information exchanged under Directive 2011/16/EU may be very relevant for the detection of violation or circumvention of restrictive measures. In return, any potential breaches of the sanctions will be relevant for tax purposes since avoidance of restrictive measures will in most cases also amount to tax avoidance in relation to these assets. Given the likely synergies and close link between the two areas, authorizing a further use of the data is therefore appropriate.

(36) In order to enhance the efficient use of resources, facilitate the exchange of information and avoid the need for each Member States to make similar changes to their systems for storing information, a central directory should be established, accessible to all Member States and only for statistical purposes to the Commission, to which Member States would upload and store reported information, instead of exchanging that information by secured email. The practical arrangements necessary for the establishment of such central directory should be adopted by the Commission.

(37) In order to ensure that a correct tax identification number (TIN) can be used by Member States, the Commission shall develop and provide Member States with a tool allowing an electronic and automated verification of the correctness of the TIN that has been provided to them by the taxpayer or the reporting person. That IT tool should help increase the matching rates for tax administrations and improve the quality of the exchanged information in general.

(38) The minimum retention period of records of information obtained through exchange of information between Member States pursuant to Directive 2011/16/EU should be no longer than necessary but, in any event, not shorter than 5 years. Member States should not retain information longer than necessary to achieve the purposes of this Directive.

(39) In order to ensure compliance with the Directive 2011/16/EU, Member States should lay down the rules on penalties and other compliance measures that should be effective, proportionate and dissuasive. Each Member State should apply those rules in accordance with their national laws and the provisions set forth in this Directive.

(40) To guarantee an adequate level of effectiveness in all Member States, minimum levels of penalties should be established in relation to two conducts that are considered grievous: namely failure to report after two administrative reminders and when the provided information contains incomplete, incorrect or false data, which substantially affects the integrity and reliability of the reported information. Incomplete, incorrect or false data substantially affect the integrity and reliability of the reported information when they amount to more than 25 % of the total data that the taxpayer or reporting entity should have correctly reported in accordance with the required information set forth in Annex VI, Section II, subparagraph (B). These minimum amounts of penalties should not prevent Member States from applying more stringent sanctions for these two types of infringements. Member States still have to apply effective, dissuasive and proportional penalties for other types of infringements.

(41) In order to take into account possible changes in the prices for goods and services, the Commission should evaluate the penalties provided for in this Directive every 5 years.

(42) For the sake of harmonising the timing between the evaluation of the application of Directive 2011/16/EU and the biennial evaluation of the relevance of hallmarks in Annex IV, the processes are aligned and will take place every 5 years after 1 January 2023.

(43) The European Data Protection Supervisor was consulted in accordance with Article 42 of Regulation (EU) 2018/1725 of the European Parliament and of the Council. ³²

(44) This Directive respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union. This Directive seeks to ensure full respect for the right to the protection of personal data and the freedom to conduct business.

(45) Since the objective of Directive 2011/16/EU, namely the efficient administrative cooperation between Member States under conditions compatible with the proper functioning of the internal market, cannot be sufficiently achieved by the Member States but can rather, by reason of the uniformity and effectiveness required, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve that objective.

(46) Directive 2011/16/EU should therefore be amended accordingly.