# Directive on Administrative Co-operation in the field of Taxation (2011/16)

The Directive on Administrative Co-operation in the field of taxation (commonly referred to as 'the DAC') is a Directive (European Union) which sets rules for the Automatic Exchange of Information (AEOI) which apply to members of the European Union (EU).
The DAC's primary purpose is to tackle tax evasion and avoidance through the sharing of information on individuals and entities within the EU.

## Overview

The Directive has been amended 7 times to expand the scope of AEOI within the EU, reflecting both global initiatives in this area undertaken by the OECD as well as the EU's own initiatives. In addition, an amendment to the Regulation on administrative cooperation and combating fraud in the field of value added tax adds an additional AEOI reporting requirement in respect of payments.
| Amendment | Amending Directive | Information Reported | OECD equivalent measure | Effective from |
| DAC | Council Directive 2011/16 | Employment Income Capital Gains Director's Fees Pensions | - | 2012 |
| DAC2 | Council Directive 2014/107 | Financial accounts | Common Reporting Standard | 2014 |
| DAC3 | Council Directive 2015/2376 | Tax rulings | BEPS Action 5 | 2012 |
| DAC4 | Council Directive 2016/881 | Country-by-country tax reporting for multinationals | BEPS Action 13 | 2016 |
| DAC5 | Council Directive 2016/2258 | Beneficial ownership of entities | - | 2017 |
| DAC6 | Council Directive 2018/822 | Cross-border arrangements which meet a hallmark of (potential) tax avoidance | BEPS Action 12 | 2018 |
| DAC7 | Council Directive 2021/514 | Sellers using digital platforms to: Rent property Rent transportation Sell goods Provide personal services | Digital Platforms Information Reporting (DPI) | 2023 |
| DAC8 | Council Directive 2023/2226 | Transactions involving the buying, selling, exchange or other acquisitions and disposals of cryptocurrency and other digital assets | Crypto-Assets Reporting Framework (CARF) | 2026 |
| CESOP | Council Regulation (EU) 2020/283 | Cross-border payment transactions where the payer/sender is in the EU, including bank transfers, direct debits, credit and debit card transactions. | - | 2024 |

## History

The original Directive (Council Directive 2011/16) entered into force in 2011 and established a framework for co-operation between Member states of the European Union in direct tax matters. The Directive excludes from its scope value-added tax matters, although a separate regulation (Council Regulation No. 904/2010) establishes similar principles
The first Directive established 2 key principles:
* Spontaneous Exchange of Information - for tax authorities to inform each other where there may be loss of tax, tax avoidance or profit shifting
* Automatic Exchange of Information - for information in the possession of tax authorities related to residents on another EU Member State, such as employment income, director's income or pensions.

### Common Reporting Standard / DAC2

In 2014, the OECD agreed the principles of Automatic Exchange of Information for financial accounts, under the Common Reporting Standard.
In order to implement these rules with the EU, the DAC was amended by Directive 2014/107 to include the exchange of information on financial accounts. This change required banks, asset managers and certain insurance companies in the EU to gather information on the tax residence of customers and to provide reports to their domestic tax authority every year for onward exchange with other EU Member States.
As a result, an EU resident who holds a bank account, investment account or other investment in another EU country will have details of that account reported to their domestic tax authority. A report by the European Parliament on the implementation of DAC2 indicated that more than 8 million accounts held by EU residents in other countries were reported in 2018.
A 2019 report into the effectiveness of the Common Reporting Standard noted that it was "substantially different from any initiative in the field of information exchange launched so far, including its role model FATCA".

### Exchange of Information on Tax Rulings / DAC3

In 2015, the Directive was amended to add the exchange of information on tax rulings, which requires tax authorities to exchange information where they grant a tax ruling to a resident of another EU Member State. This gave effect to Action 5 of the OECD's Base erosion and profit shifting initiative (BEPS) which required the same exchange of information between all BEPS adopters.
This amendment is the only rule under the DAC which does not impose any obligations on companies to provide additional information to their tax authority.

### Country-by-country reporting / DAC4

In 2016, the Directive was amended to add the exchange of Country-by-Country Reporting by companies operating in the EU. This gave effect to Action 13 of the OECD's BEPS initiative in the EU.
All multinational companies with revenues greater than €750 million are required to submit reports annually to their tax authority, including groups which are parented outside of the EU but operate in the EU.
In 2021, the EU agreed Directive 2021/2101 which requires public country-by-country reporting to be published by the same companies from 2026 and available on the company's website or on a central register. The requirement under DAC4 remains in place, as more information is required under DAC4 than under the public disclosure rules.

### Exchange of beneficial ownership information / DAC5

The Directive was amended again in 2016 to provide access to beneficial ownership registers which were established under Anti Money Laundering Directives. In particular, Council Directive 2015/849, the EU's 4th Anti-Money Laundering Directive created a requirement for the registration of information on beneficial ownership in a central register.

### Mandatory Disclosure Rules / DAC6

The Directive was amended in 2018 to include exchange of information on 'cross-border arrangements', which are transactions which meet one or more hallmarks of (potential)Tax avoidance and which involve residents of EU Member States, or otherwise concern member states.
The Directive defines 15 hallmarks of potential tax avoidance which include secrecy requirements, conversion of income to capital, double deductions for expenses, and cross-border movements of assets or business.
Those rules also gave effect to the OECD's Model Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures which require reporting on transactions which seek to avoid reporting under DAC2.
Due to the COVID-19 pandemic, the EU Council subsequently amended the Directive to allow 6-months of additional time for implementation.

### Digital Platforms Information reporting / DAC7

In 2020, the Directive was amended to include rules which require digital platforms to report information on sellers who use the platform to:
* Rent property
* Rent transportation
* Sell goods
* Provide personal services
The rules mirror the OECD's Digital Platforms Information package and implement the rules in the EU.
DAC7 has two notable differences from previous amendments to the Directive:
* It is extraterritorial in scope, requiring all digital platforms globally to report on sellers resident in the EU. For example, an EU resident individual selling on a platform based in the US would be reportable under these rules.
* It requires reporting on both domestic and cross-border sellers. For example, a platform resident in France must also report on French sellers. Previous Directives have been restricted to cross-border reporting in line with the EU's remit to act in furtherance of the European single market.

### Crypto-Assets Reporting Framework / DAC8

In 2023, the EU agreed an amendment to the Directive to implement the OECD's Crypto-Assets Reporting Framework for all member states. That adoption was closely tied to the EU's adoption of Markets in Crypto-Assets (MiCA) regulations, with the two regimes intended to work together. These rules require Crypto-Asset Service Providers to report on all transactions which involve the acquisition, disposal or exchange of cryptocurrency and other digital assets.
Like DAC7, the scope of DAC8 is extraterritorial - for example, requiring cryptocurrency exchanges based in the US to report on EU resident customers.
The DAC8 establishes new amendments to the developed set of rules on administrative cooperation in the field of taxation.
The rules are due to go into effect from 1 January 2026.

### Central Electronic System of Payments (CESOP)

In addition to the amendments to the DAC, an additional AEOI reporting requirement was added in 2020 in respect of VAT. This was added through amendments to the VAT Directive and the Regulation on administrative cooperation and combating fraud in the field of value added tax as the DAC only applies to direct tax matters.
Those amendments create a reporting obligation known as CESOP, which requires Payment Service Providers in the EU to report on payments made by EU residents.

## Mechanism for information gathering and exchange

With the exception of the original DAC and DAC3, all other amendments to the Directive require information to be provided by private companies to their domestic tax authorities, who then exchange information with EU Member States through the Common Communication Network. In the case of DAC2, DAC3, DAC4, DAC7 and DAC8, EU Member States will also exchange the information collected with non-EU countries operating under the rules established by the OECD's Global Forum on Transparency and Exchange of Information for tax purposes. This also applies to a sub-set of information exchanged under DAC6.
As a result of the DAC, a wide range of companies are required to establish procedures to identify EU residents and report information on their activities to their domestic tax authority. These companies are commonly referred to as 'intermediaries' in the text of the DACs.

### Intermediaries with obligations under the DAC

| DAC | In scope intermediaries | Information reported |
| DAC2 | Banks, asset managers, trust companies, wealth managers and other investment vehicles | Balance and income on financial accounts held outside country of residence. |
| DAC5 | Trust companies, company secretaries | Beneficial owners of certain vehicles |
| DAC6 | Lawyers, accountants, tax advisors and other who provide tax advice as an ancillary service | Information on transactions which meet one of 15 hallmarks of tax avoidance |
| DAC7 | Digital platforms who connect buyers and sellers engaged in the sale of goods, rental of accommodation, rental of transport or provision of personal services | Quarterly breakdown of income received from activities, fees paid to the platform and any taxes withheld |
| DAC8 | Cryptocurrency exchanges, fintechs, other digital assets protocols other than fully decentralized finance | Full transaction details on the acquisition and disposal of cryptocurrencies and other digital assets, whether for fiat money or other digital assets. |
| CESOP | Payment Service Providers under the Payment Services Directive (PSD2) | Full transaction details on cross-border payments at a transaction level, including identifying information for the recipient. |

### Impact on individuals resident in the EU

Individuals resident in the EU are likely to be asked to provide certain information by intermediaries who are within the scope of the DAC. Typically an EU resident opening a bank account, investment account or establishing themselves as a seller on a digital platform should be asked to provide details of their tax residency and their Tax Identification Number. From 2026, this will also apply to EU citizens establishing relationships with cryptocurrency exchanges and other digital assets providers.
Individuals may be asked to provide additional information where they provide more complex information - for example, a tax residency in one country but an address in another country. The precise rules to be followed vary for each of the DACs.
There have been legal challenges raised in relation to the scope of the DAC and the perceived risk to data security. For example, an Italian individual challenged the exchange of information by the UK's tax authority HM Revenue and Customs under the Common Reporting Standard/DAC2. In 2022, the European Court of Justiceconcluded that the rules under DAC6 which required law firms to report on client activities would breach Legal professional privilege requirements.