DAC8 and Aggregate vs Transaction-Level Reporting

One of the most important technical decisions in DAC8 implementation is understanding the level of detail required in reports. DAC8 follows an aggregate reporting model rather than transaction-level reporting, but the distinction requires careful understanding.

The Aggregate Model

Under DAC8, CASPs do not report each individual transaction separately. Instead, they report aggregate data for each user, broken down by transaction type (fiat-to-crypto, crypto-to-crypto, transfer, payment) and by crypto-asset.

For each combination of user, transaction type, and crypto-asset, the report includes the total gross amount in fiat currency equivalent, the total number of units of the crypto-asset, the total fair market value, and the total number of transactions.

This means that if a user conducted 500 Bitcoin-to-euro trades during the year, these would be aggregated into a single reporting entry showing the combined amounts, rather than 500 individual transaction records.

Why Aggregate Reporting?

The aggregate model serves several purposes. It reduces the volume of data exchanged between tax authorities. It aligns with the OECD CARF standard. It reduces the file size and processing complexity of XML reports. And it provides tax authorities with the summary information needed to identify potential non-compliance, without overwhelming them with granular transaction data.

The Underlying Requirement: Transaction-Level Records

While the reports themselves are aggregated, CASPs must maintain transaction-level records to support the aggregated figures. Tax authorities may request granular data during audits or investigations. CASPs must be able to demonstrate how the aggregated amounts in their reports were calculated from the underlying transactions.

This means that the internal systems must capture and store every individual transaction with its timestamp, amount, crypto-asset type, fair market value, and classification. The aggregation is performed only at the point of report generation.

Aggregation Challenges

Several practical challenges arise in the aggregation process. Fair market value calculation requires determining the value of each crypto-asset at the time of each transaction, which can vary significantly within a single day. Currency conversion for CASPs that operate in currencies other than the reporting currency must be handled consistently. Transaction classification ambiguities must be resolved before aggregation, as misclassification would corrupt the aggregate figures. And multi-asset transactions (such as swaps involving three or more assets) must be decomposed into reportable pairs.

Conclusion

DAC8's aggregate reporting model simplifies the reports themselves but requires comprehensive transaction-level record-keeping. CASPs must build systems that capture granular data and can reliably aggregate it into accurate reports.