DAC8 Reporting Obligations for Non-EU Platforms

Non-EU crypto-asset platforms that serve EU-resident users face important questions about their DAC8 reporting obligations. The directive is designed to capture not only EU-established platforms but also, under certain conditions, platforms based outside the EU. Understanding when these obligations apply and how to comply is essential for any non-EU platform with European users.

When Non-EU Platforms Must Report

DAC8 establishes a framework under which non-EU Crypto-Asset Service Providers may become Reporting Crypto-Asset Service Providers (RCASPs) if they serve users who are tax residents of EU Member States. The key triggers typically include:

Nexus Rules

A non-EU platform may need to register and report under DAC8 when it has a sufficient connection (nexus) to the EU. This nexus can be established through:

• Providing services to EU-resident users: If a non-EU platform has users who are tax residents of one or more EU Member States, it may trigger reporting obligations for those users.
• Active solicitation of EU clients: Marketing services to EU residents or making services specifically available to EU markets may strengthen the nexus.
• Having a physical presence or representative in an EU Member State.

The precise nexus rules and thresholds should be verified against the final text of DAC8 and each Member State's transposing legislation.

Absence of Equivalent Exchange Agreement

DAC8's framework takes into account whether a non-EU platform's home jurisdiction participates in equivalent information exchange arrangements (such as the OECD's CARF). If the platform's home country has implemented CARF and has an exchange agreement with relevant EU Member States, the platform's home-country reporting may satisfy the information exchange need, potentially reducing or eliminating the need for separate DAC8 registration.

However, if the home jurisdiction does not participate in equivalent exchange or does not have agreements with the relevant EU states, the platform should expect to face direct DAC8 obligations.

The Single Registration Mechanism

To reduce the compliance burden on non-EU platforms, DAC8 provides for a single registration mechanism. Under this approach:

• A non-EU platform may register with the competent authority of a single EU Member State.
• The platform reports to that Member State's authority.
• The receiving authority then shares the reported information with other Member States whose residents are served by the platform.

This mechanism is intended to avoid requiring non-EU platforms to register separately in every Member State where they have users. The platform should generally be able to choose which Member State to register with, though there may be conditions or preferences specified in the directive.

Registration Process

Non-EU platforms that need to register under DAC8 should anticipate the following:

Choosing a Registration Member State

When selecting a Member State for registration, platforms may wish to consider:

• The Member State where the largest number of their EU users reside.
• The language capabilities and administrative processes of the competent authority.
• Any Member State-specific requirements that go beyond the directive's minimum standards.

Information Required for Registration

The registration process will likely require the platform to provide:

• Entity name and legal form
• Registered address and principal place of business
• Tax Identification Number (TIN) in the home jurisdiction
• Contact details for the person responsible for compliance
• Details of the crypto-asset services provided to EU users

Ongoing Obligations

Once registered, the non-EU platform should expect to:

• Perform due diligence on all EU-resident Reportable Users.
• Submit annual reports to the chosen Member State's competent authority.
• Maintain records for the prescribed retention period.
• Respond to inquiries from the competent authority.

Due Diligence for EU Users

Non-EU platforms must perform the same due diligence procedures on their EU-resident users as EU-established platforms. This includes collecting:

• Full legal name, date of birth, and address
• Tax Identification Number (TIN) for each relevant jurisdiction
• Country of tax residence

For non-EU platforms that have not historically collected TINs from EU users, a remediation process to gather this information may be necessary.

Consequences of Non-Compliance

Non-EU platforms that fail to register and report under DAC8 when required may face:

• Penalties and sanctions imposed by the relevant Member State authority.
• Potential restrictions on providing services to EU residents.
• Reputational consequences that may affect the platform's ability to operate in or expand into European markets.

The specific enforcement mechanisms will depend on how each Member State transposes and enforces DAC8.

Interaction with CARF

DAC8 is closely aligned with the OECD's Crypto-Asset Reporting Framework (CARF). Non-EU platforms whose home jurisdictions implement CARF may find that their CARF compliance efforts can be leveraged for DAC8 purposes, particularly regarding:

• Due diligence procedures, which are substantially similar.
• Data collection requirements, which largely overlap.
• Reporting formats, which may be harmonized over time.

However, non-EU platforms should not assume that CARF compliance alone satisfies DAC8 obligations. The two frameworks operate independently, and DAC8 may have additional requirements specific to the EU context.

Practical Steps for Non-EU Platforms

1. Determine whether EU-resident users are served by the platform and in what volume.
2. Assess nexus rules to determine whether registration is required.
3. Check whether the home jurisdiction participates in CARF or equivalent information exchange agreements.
4. Select a Member State for single registration if required.
5. Implement due diligence procedures for EU-resident users.
6. Build reporting capabilities compatible with DAC8's data requirements and submission formats.
7. Engage EU-qualified legal and tax advisors to navigate the registration and reporting process.

Conclusion

Non-EU platforms should not assume that operating outside the EU exempts them from DAC8 obligations. The directive's nexus rules are designed to capture platforms serving EU residents regardless of where the platform is established. The single registration mechanism provides a streamlined path to compliance, but early assessment and preparation are essential.

This article provides general information and should not be treated as legal or tax advice. Non-EU platforms should seek professional guidance specific to their jurisdiction and operational model.