Implementation of DAC8 marks the end of non-taxation for crypto assets

Crypto asset service providers in 47 jurisdictions around the world, including Portugal, have started to collect transaction data from users to enforce tax compliance under the OECD’s new Crypto-Asset Reporting Framework (CARF) from 1 January 2026.

Crypto asset service providers are now required to facilitate the automatic exchange of tax information on transactions in crypto assets concerning taxpayers resident in Portugal on an annual basis. It signals the end of anonymity in crypto transactions and the beginning of structured, mandatory crypto information exchange.

The growth of the crypto-asset market over the past decade has created significant challenges to tax authorities worldwide. Crypto assets can be transferred and held without interacting with traditional financial intermediaries and without any central administrator having full visibility. In addition, crypto assets as an asset class were generally out of scope for existing Automatic Exchange of Information (AEOI) frameworks like the OECD Common Reporting Standard (CRS).

In response, the G20 countries handed the Organisation for Economic Co-operation & Development (OECD) a mandate to develop the CARF, a dedicated global tax transparency framework to facilitate AEOI on transactions in crypto assets with a taxpayer’s jurisdiction of residence in a standardised manner on an annual basis. The OECD also updated the CRS to cover the use of virtual assets. This updated regime is generally known as ‘CRS 2.0’.

In 2023, the European Council reached political agreement on aligning with the OECD’s CARF and CRS 2.0 rules via an eighth amendment to the EU Directive on Administrative Cooperation (DAC), which is known as the ‘DAC8’.

The definition of crypto assets under the DAC8 focuses on the use of cryptographically secured distributed ledger technology (DLT), or similar emerging technologies, as the distinguishing factor underpinning the creation, holding and transferability of crypto assets. This broad scope includes stablecoins, specific e-money tokens, selected non-fungible tokens (NFTs), central bank digital currencies (CBDCs) and crypto-assets utilised for payment or investment purposes.

A ‘Reporting Crypto Asset Service Provider’ (RCASP) includes any individuals or entities that, as a business, provide a service effectuating exchange transactions for or on behalf of customers. This includes crypto exchanges, custodial wallet providers, platforms enabling crypto-to-crypto or crypto-to-fiat exchanges, as well as certain brokers and intermediaries.

A reportable Crypto Asset User is an individual or entity that is a customer of an RCASP and that is resident for tax purposes in a reportable jurisdiction. Entity users include companies, partnerships, trusts and charities. RCASPs must identify Crypto Asset Users, determine their tax residence and report transaction details annually to the relevant tax jurisdictions.

Under CRS 2.0, the scope of the CRS has been expanded to include Specified Electronic Money Products (SEMPs) and Central Bank Digital Currencies (CBDCs). Indirect investments in crypto assets, including those made through derivatives and investment vehicles, are also now potentially within scope, subject to interaction with the CARF regime.

DAC8 also advocates for the use of an EU Tax Identification Number (TIN) to streamline the monitoring of cross-border crypto-asset transactions effectively. This provision enables authorities to efficiently link transactions to individuals or entities, enhancing the ability to trace and audit cross-border activities within the crypto market.

Under the DAC, penalties are applied in cases of serious non-compliance by service providers, ensuring a uniform approach across EU member states to enforce adherence and deter misconduct within the crypto-asset market. The fines for non-compliance can reach €22,000 with the potential for revoking the operator’s registration in the EU.

All EU member states were required to implement the DAC8 legislation into their national law by 31 December 2025 so that the reporting could commence from 1 January 2026. First reporting, in respect of 2026 data, is to be provided to competent authorities in 2027.

However, 12 member states, including Portugal, failed to notify the European Commission that they had transposed the DAC8 provisions into domestic legislation and, on 30 January this year, the Commission announced its decision to launch infringement procedures against these member states by sending them letters of formal notice. Member states had two months to respond and complete their transposition.

The Portuguese government sent draft legislation to the parliament last December and it is expected that DAC8 will now be transposed as a priority. Updated guidance and information will be issued during 2026 to give financial institutions and RCASPs time to update their policies and processes and ensure on-going compliance.

We will keep clients updated on the legislative process but it is clear that RCASPs will be required to collect and send information to the tax authorities about users who are resident in Portugal or who have controlling persons who are resident in Portugal, and about the transactions carried out by these users. These transactions range from exchanges between crypto-assets and fiat currency, crypto payments, or transfers to external wallets, among others.

It is important to note, that the aim of CARF is to increase transparency and to allow authorities to close the tax gap in respect of crypto assets. Under CARF, the aggregate of transactions for each type of crypto asset is provided. This will assist the Portuguese revenue authority to assess whether taxpayers are declaring their crypto asset gains, but the burden of calculating and reporting tax liabilities on crypto assets remains solely with the taxpayer. However, Sovereign can assist clients in meeting their obligations, including the reporting of crypto transactions on their personal tax returns.

To demonstrate the reach of the CARF framework, the 47 jurisdictions, including all EU members states, that have committed to undertake first exchanges of information in relation to crypto-assets during 2027 comprise: Austria, Belgium, Brazil, Bulgaria, the Cayman Islands, Chile, Colombia, Croatia, Czechia, Denmark, Estonia, the Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hungary, Iceland, Indonesia, Ireland, the Isle of Man, Israel, Italy, Japan, Jersey, Kazakhstan, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, the Netherlands, New Zealand, Norway, Poland, Portugal, Romania, San Marino, the Slovak Republic, Slovenia, South Africa, Spain, Sweden, Uganda and the UK.

A further 28 jurisdictions have committed to undertake first exchanges during 2028, comprising Australia, Azerbaijan, the Bahamas, Bahrain, Barbados, Belize, Bermuda, the British Virgin Islands, Canada, Costa Rica, Cyprus, Hong Kong (China), Israel, Kenya, Malaysia, Mauritius, Mexico, Mongolia, Nigeria, Panama, the Philippines, St Vincent & the Grenadines, the Seychelles, Singapore, Switzerland, Thailand, Turkey and the United Arab Emirates.

The US has also committed to undertake first exchanges during 2029, while Argentina, El Salvador, Georgia, India and Vietnam have all been identified by the OECD as jurisdictions that are relevant to the CARF, but which have not yet committed to implementation.