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Companies of any size processing crypto transactions for customers in the European Union will soon need to report these for tax purposes under proposed legislation.
The policy, put forward as an addition to a wider package of anti-tax evasion measures, says that even non-European crypto-asset operators will need to report transactions if they have clients who are EU residents.
Companies would need to provide personal information about their users, including where they live and when and where they were born, to tax authorities. Alongside this, they would need to include the amount that person spent buying crypto, or how much they received from selling them.
Policymakers said in a document outlining the directive that introducing an obligation to report income earned through crypto investments would help EU member states get an accurate picture of what taxes they are owed, leading to additional income of as much as €2.4 billion ($2.53 billion).
Common reporting rules would help the industry, too, according to the commission.
“Transparency on income earned by crypto-asset investors would improve the level playing field with more traditional assets,” the proposal said.
For the EU, implementing the rules would cost an initial €300 million, followed by another €25 million each year.
As for the affected businesses, policymakers say the initiative would have a “limited” impact on small- and medium-sized firms, arguing that the information to be reported is available to them already.
“While the initiative will bring compliance costs, it may be more favorable to SMEs to have a single set of rules across the EU, rather than a potential patchwork of reporting requirements across the EU,” the Council’s summary of its impact assessment said.
Crypto advocates push back against EU
There are fears from industry advocates that the regulation would place an undue burden on companies operating in the region.
“The information requested from the CASPs [Crypto Asset Service Providers] is extremely significant and complex to calculate,” European Crypto Initiative President Simon Polrot told Decrypt. “The estimated cost for service providers seems underestimated, and the mass of information to be produced and sent will be enormous. Will [Member State] tax authorities have the means to process this information?”
Feedback on the adopted act is open for at least eight weeks, after which any responses will be presented to the European Parliament and Council as part of the legislative debate.
The EU is in the middle of finalizing its landmark crypto regulation package, Markets in Crypto Assets, dubbed MiCA.
The bill, which would establish a framework for crypto services across its members, is expected to be voted on in February.