In a new document released by the European Union, the agency seeks to advance its tax mechanism for crypto.
The document features a directive that mentions that companies of any size processing crypto transactions for customers in the EU will be required to report these for tax purposes under the proposed legislation. The policy is an addition to a broader package of anti-tax evasion measures.
As per the proposed policy, even non-European crypto-asset operators will need to report transactions if they have clients who are EU residents. The companies would also be required to provide personal data to the tax authorities about their users, including their address, place of birth, etc.
Additionally, the companies would be required to send data concerning the transactions, including the amount that person spent on buying crypto or how much the receiver gained on selling them.
The policymakers intend to oblige to report income through crypto investments to help the member states accurately understand the taxes they are owed. They are projecting an additional income of €2.4 billion ($2.53 billion) through it.
According to the EU, reporting tax figures would also help the industry. The proposal states that “transparency on income earned by crypto-asset investors would improve the playing field with more traditional assets.”
It also claimed that implementing the tax rules would cost the EU an initial €300 million and about €25 million annually. For the affected businesses, it would have a limited impact on small and medium-sized companies considering that all the information is already available.
The Council’s summary of the impact assessment also mentioned that while the initiative will bring in compliance or implementation costs, it will be more advantageous to SMEs to have a single set of rules instead of a potential patchwork of reporting requirements across the EU.
However, crypto advocates fear that the proposed policy would burden firms operating in the region.
Simon Polrot, President of the European Crypto Initiative, opined that the data the providers have been told to submit is highly significant and complex to calculate. He also asked if the tax authorities could process the information, as the estimated cost for service providers seems underestimated. The mass of information to be produced and sent will be enormous.
The feedback on the adopted act is open for at least eight weeks, following which the responses will be presented to the European Parliament and Council as part of the legislative debate. The EU is finalizing its crypto regulation – Markets in Crypto Assets (MiCA), which would establish a framework for its members.