DAC8 implementation increases the risk of criminal tax prosecution in crypto trading

Since January 1, 2026, the Crypto Asset Tax Transparency Act (KStTG) in force. It implements DAC8 (EU Directive 2023/2226 – Directive on Administrative Cooperation) in Germany and obliges crypto asset service providers in the EU to report transaction data to the tax authorities.

The crypto market was previously a black box for the tax authorities. Taxpayers declared their crypto income themselves and the tax authorities checked this information against existing income tax rules. The tax authorities were only able to check the actual amount of income and the completeness of the declarations to a very limited extent. According to estimates, more than 50 billion euros in profits were generated from cryptocurrencies in Europe last year.

The KStTG puts an end to the information deficit of the tax authorities. For the first time in 2027, all crypto service providers in the EU will have to report transactions for periods from 2026 onwards.

The tax authorities receive automated access to transaction data from Germany and abroad, including Bitcoin, Ethereum, Ripple, Cardano and Zcash. This applies regardless of whether crypto assets are held as private or business assets.

This identifies users and enables the authorities to ensure that transactions in Switzerland and abroad are recorded correctly for tax purposes.

Crypto asset service providers have comprehensive reporting and information obligations

In addition to personal data (name, address, tax ID), the report includes detailed transaction data, namely:

• the designation of the crypto value
• the sum of the amounts/market values
• the number of units transferred and
• the number of transactions.

Crypto asset providers transmit the data to the BZSt, which is then forwarded to tax offices

The providers transmit their data to the Federal Central Tax Office (BZSt) by July 31 each year. The BZSt forwards the data of domestic users to the state tax authorities. Data from foreign users is forwarded to the tax authorities of the respective country of residence.

These groups are subject to the reporting obligation under DAC8 and the KStTG

The new transparency obligations affect all companies and private individuals who use the services of crypto asset service providers, as their data will be passed on. Users are neither informed nor consulted prior to the transfer.

All users who:

• are resident in Germany for tax purposes
• are resident in an EU Member State
• are resident in a so-called qualifying third country that has agreed an automatic exchange of information with Germany

The BZSt will provide a list of these countries in the future.

The user’s obligation to provide information

In order for crypto value service providers to be able to report the data, users must provide a self-disclosure. This includes the name or company name, address, country of residence and tax identification number. Existing customers who were already in a business relationship with the service provider before January 1, 2026 must submit the reports by January 1, 2027. If they miss the deadline, they could face transaction blocks and fines of up to 50,000 euros in the worst case. These sanctions can also be imposed for incorrect or incomplete information.

The previous system continues to apply to the taxation of crypto-assets

The DAC8 Implementation Act does not create any new tax situations, but is intended to ensure transparency. The existing tax system with the following key points continues to apply:

• Depending on the individual case, income can relate to different types of income (e.g. income from business operations, capital assets, private sales transactions or other income).
• Gains from the sale of privately held crypto assets are taxable if they are realized within one year.
• After the one-year holding period has expired, capital gains on private assets are tax-free.
• The one-year holding period does not apply to disposals of business assets; profits are commercial income and are subject to income or corporation tax and, if applicable, trade tax.
• Income from mining, forging, staking or lending is commercial or other income, depending on how it is structured; there is no annual time limit here.

Due to the large number of possible transactions in connection with crypto assets, there is a considerable risk of overlooking tax-relevant issues, including when determining the holding period.

Users should document transactions comprehensively

The new transparency significantly increases the likelihood of tax audits. Users should therefore in particular:

• Keep transaction overviews, tax reports and other evidence such as tabular overviews, screenshots from wallets or accounts,
• document complete and detailed information on each transaction, including the number of units transferred, the acquisition costs and the disposal proceeds, in each case stating the acquisition/sale date and the respective market values,
• Save report settings, e.g. the exchange rates used, the method of conversion into official currencies, the order of use.

There is a risk of criminal tax investigations and fines; voluntary disclosure can protect you

The newly created data image enables the tax authorities to easily identify incomplete information. If income is not declared or is declared incorrectly, there is a risk of criminal tax proceedings and fines.

It can also be assumed that the tax authorities will also target periods prior to 2026 and other income in connection with crypto assets, for example from mining, forging, staking or lending.

If there is a potential risk of reckless or deliberate tax evasion, a timely voluntary disclosure can exempt you from penalties and fines, provided it is made in full and before it is discovered by the tax authorities. The support of an experienced, specialized advisor is important for the review and implementation.

Conclusion: DAC8 creates transparency for tax authorities and forces taxpayers to act

With DAC8, the EU is implementing the next major regulatory step in the crypto sector after the MiCA Regulation. The aim is to create tax transparency through the mandatory reporting of all relevant crypto transactions to the tax authorities and their automated EU-wide exchange.

For the first time, this creates a data basis that enables tax authorities to systematically record and evaluate crypto transactions and compare them with tax returns. The focus is clearly on combating tax evasion.