The History of EU Tax Transparency: From DAC1 to DAC8

The European Union's Directive on Administrative Cooperation (DAC) has been the cornerstone of tax transparency and information exchange within the EU since 2011. Over the past decade and a half, the directive has been amended eight times, each iteration expanding its scope to address new challenges in cross-border tax compliance. Understanding this evolution provides essential context for DAC8 and the trajectory of EU tax policy.

DAC1 (2011): The Foundation

Council Directive 2011/16/EU, known as DAC1, established the basic framework for administrative cooperation between EU Member States in the field of taxation. It replaced the earlier Directive 77/799/EEC and introduced automatic exchange of information as the standard method for sharing tax-relevant data across borders.

DAC1 required Member States to automatically exchange information about five categories of income: employment income, directors' fees, life insurance products not covered by other EU directives, pensions, and ownership of and income from immovable property.

The directive established the principle that tax authorities should cooperate proactively rather than waiting for individual requests, laying the groundwork for all subsequent amendments.

DAC2 (2014): Financial Accounts

Council Directive 2014/107/EU (DAC2) represented a major expansion of the automatic exchange framework. It incorporated the OECD's Common Reporting Standard (CRS) into EU law, requiring financial institutions across the EU to report information about financial accounts held by non-resident individuals and entities.

DAC2 covered bank accounts, custodial accounts, equity and debt interests in investment entities, and cash value insurance contracts. It brought the EU into alignment with the global CRS framework, which was being implemented simultaneously in over 100 jurisdictions worldwide.

This amendment marked the first time that detailed financial account information — including balances, interest, dividends, and gross proceeds from sales — was subject to automatic exchange within the EU.

DAC3 (2015): Tax Rulings

Council Directive 2015/2376/EU (DAC3) addressed the lack of transparency around cross-border tax rulings and advance pricing arrangements (APAs). In the wake of the "LuxLeaks" scandal, which revealed that certain Member States had granted favorable tax rulings to multinational corporations, the EU mandated automatic exchange of information on all cross-border rulings.

Under DAC3, Member States must share information about any tax ruling or APA that has a cross-border dimension, including the identity of the taxpayer, the nature of the ruling, and the Member States likely to be affected. This information is stored in a central directory maintained by the European Commission.

DAC4 (2016): Country-by-Country Reporting

Council Directive 2016/881/EU (DAC4) implemented the OECD's Base Erosion and Profit Shifting (BEPS) Action 13 recommendations within the EU. It required large multinational enterprise groups with consolidated revenues exceeding €750 million to submit Country-by-Country Reports (CbCR) to their home tax authority.

These reports include information about the group's global allocation of income, taxes paid, and economic activity for each jurisdiction where the group operates. The reports are then automatically exchanged with the tax authorities of other relevant Member States.

DAC5 (2016): Access to AML Information

Council Directive 2016/2258/EU (DAC5) granted tax authorities access to anti-money laundering (AML) due diligence information held by financial institutions. This included customer identity records, beneficial ownership information, and transaction records collected under the EU's Anti-Money Laundering Directives.

DAC5 recognized that AML and tax compliance share common data requirements and that providing tax authorities with access to AML data would improve tax enforcement efficiency without creating additional reporting burdens for financial institutions.

DAC6 (2018): Reportable Cross-Border Arrangements

Council Directive 2018/822/EU (DAC6) introduced mandatory disclosure rules (MDR) for intermediaries involved in potentially aggressive cross-border tax planning arrangements. Tax advisors, lawyers, accountants, and financial institutions were required to report arrangements that displayed certain hallmarks indicative of aggressive tax planning.

DAC6 was particularly significant because it shifted some of the transparency burden from taxpayers and financial institutions to the intermediaries that design and promote tax planning structures. It identified 15 specific hallmarks across five categories that trigger reporting obligations.

DAC7 (2021): Digital Platforms

Council Directive 2021/514/EU (DAC7) extended the automatic exchange framework to the digital platform economy. Platform operators facilitating the provision of services, the sale of goods, the rental of property, or the rental of transport were required to collect and report information about the sellers operating through their platforms.

DAC7 addressed the tax transparency gap created by the rapid growth of platform-based work and commerce. It recognized that traditional tax reporting mechanisms were not capturing income earned through digital platforms, particularly when sellers operated across multiple Member States.

DAC7 also introduced important procedural improvements to the DAC framework, including a framework for joint audits between Member States and enhanced provisions for the exchange of information on request.

DAC8 (2023): Crypto-Assets

Council Directive 2023/2226/EU (DAC8) is the most recent amendment, extending the automatic exchange framework to crypto-assets. Adopted on October 17, 2023, it requires crypto-asset service providers to collect and report information about their users' crypto-asset transactions to tax authorities.

DAC8 represents several firsts in the evolution of the DAC framework. It is the first directive to incorporate an OECD framework (CARF) that was developed specifically for a new asset class. It is the first to be directly linked to a separate EU regulatory framework (MiCA). And it is the first to address assets that are inherently cross-border by design, requiring a level of international coordination that exceeds anything required by previous DAC amendments.

The Arc of EU Tax Transparency

Looking at the DAC series as a whole, a clear pattern emerges. Each successive amendment has expanded the types of economic activity subject to automatic exchange of information:

DAC1 covered basic income categories. DAC2 added financial accounts. DAC3 addressed tax rulings. DAC4 targeted multinational profit allocation. DAC5 bridged AML and tax data. DAC6 captured tax planning arrangements. DAC7 covered the platform economy. DAC8 now encompasses crypto-assets.

This progression reflects the EU's commitment to eliminating tax transparency gaps as new forms of economic activity emerge. With each amendment, the scope of information available to tax authorities has grown, making it increasingly difficult for tax evasion to go undetected.

What Comes Next?

The European Commission has signaled that the DAC framework will continue to evolve. Potential future amendments could address areas such as digital currencies issued by central banks (CBDCs), decentralized finance (DeFi) protocols that operate without traditional intermediaries, tokenized real-world assets, and new forms of digital income that do not fit neatly into existing reporting categories.

For crypto-asset service providers, DAC8 is not the end point but rather the beginning of an increasingly comprehensive tax transparency regime that will continue to expand in scope and sophistication.

Conclusion

DAC8 is the latest chapter in a 15-year journey toward comprehensive EU tax transparency. Understanding its place within the broader DAC framework helps CASPs appreciate both the legal foundations of their reporting obligations and the direction in which EU tax policy is heading. Compliance with DAC8 should be seen not as an isolated regulatory burden but as part of a systemic shift toward full tax transparency across all asset classes and economic activities.