DAC8 Vendor Selection: Choosing the Right Compliance Solution

Many CASPs will rely on external vendors for parts of their DAC8 compliance infrastructure. This article provides guidance on evaluating and selecting DAC8 compliance solution providers.

Build vs Buy Decision

The first strategic decision is whether to build DAC8 compliance capabilities in-house or purchase from a specialized vendor. Factors favoring an in-house build include existing technical capabilities and data infrastructure, unique business requirements that off-the-shelf solutions may not address, desire for full control over the compliance process, and long-term cost considerations for large organizations.

Factors favoring a vendor solution include limited internal technical resources, need for rapid implementation, access to vendor expertise in tax reporting standards, ongoing maintenance and updates handled by the vendor, and proven compliance with the XML schema and validation rules.

Key Selection Criteria

When evaluating DAC8 compliance vendors, assess the following dimensions:

Functional completeness. Does the solution cover all aspects of DAC8 compliance — data collection, transaction classification, aggregation, XML generation, validation, submission, and correction? Partial solutions create integration challenges.

Jurisdictional coverage. Does the solution support all EU Member States where your users are tax resident? TIN validation, in particular, requires jurisdiction-specific logic.

Integration capabilities. How easily does the solution integrate with your existing systems — trading engine, user database, transaction ledger? API-based integration is typically most flexible.

Scalability. Can the solution handle your current and projected transaction volumes? Performance under load is critical for report generation.

Vendor track record. Has the vendor successfully implemented similar tax reporting solutions (such as CRS or FATCA)? Experience with international tax reporting standards is a strong indicator of DAC8 capability.

Support and maintenance. What level of ongoing support does the vendor provide? Tax reporting requirements evolve, and the solution must be maintained to reflect regulatory changes.

Conclusion

Vendor selection is a critical strategic decision that will affect DAC8 compliance quality and operational efficiency for years. CASPs should invest adequate time in evaluation and avoid rushing the selection process.