DAC8 and CRS: Understanding the Overlap

The Common Reporting Standard (CRS) has been the cornerstone of international tax transparency since 2014. DAC8 extends this transparency to crypto-assets. Understanding the relationship between the two frameworks helps CASPs — particularly those that also hold traditional financial licenses — manage their reporting obligations efficiently.

CRS Fundamentals

CRS requires financial institutions to identify the tax residency of their account holders and report financial account information to their home tax authority, which then exchanges the data with the account holder's jurisdiction of tax residence. The reporting covers bank accounts, custodial accounts, investment fund holdings, and certain insurance products.

How DAC8 Extends CRS

DAC8 effectively extends the CRS model to crypto-assets. The conceptual framework is identical: identify users, determine their tax residency, collect TINs, and report transaction data to the home tax authority for exchange. The key difference is that CRS covers traditional financial accounts while DAC8 covers crypto-asset transactions.

Overlapping Obligations

CASPs that also hold traditional financial licenses (such as banks offering crypto services) may have both CRS and DAC8 obligations for the same clients. A client who holds a bank account and a crypto trading account with the same institution will be reported under CRS for the bank account and under DAC8 for the crypto account.

The identification data (name, address, TIN, tax residency) must be consistent across both reports. Inconsistencies between CRS and DAC8 data for the same individual will attract scrutiny from tax authorities.

Leveraging CRS Infrastructure

CASPs with existing CRS compliance infrastructure can leverage several components for DAC8. TIN collection and validation processes, self-certification workflows and forms, XML generation capabilities (though the schema differs), quality assurance procedures, and competent authority submission channels can all be adapted for DAC8 purposes.

Key Differences to Note

Despite the similarities, important differences exist between CRS and DAC8. CRS reports account balances while DAC8 reports transaction aggregates. CRS uses the CRS XML schema while DAC8 uses the CARF XML schema. CRS has established correction procedures that may differ from DAC8's. And CRS's de minimis thresholds do not apply to DAC8 (which has no thresholds).

Conclusion

CRS and DAC8 are complementary frameworks that share a common conceptual foundation. CASPs with CRS experience have a significant advantage in DAC8 implementation, but must be aware of the technical differences between the two reporting standards.