EU slaps 12 states with crypto tax compliance warnings

The European Commission has warned 12 European Union member states for failing to fully implement new EU rules requiring the reporting of crypto-related tax information. 

The move reflects the European Union’s increased determination to tighten oversight of digital assets and ensure crypto activity does not evade tax authorities. 

In its January infringements package released on Friday, the Commission said it will send letters of formal notice to Belgium, Bulgaria, Czechia, Estonia, Greece, Spain, Cyprus, Luxembourg, Malta, the Netherlands, Poland, and Portugal. 

The notices are the early stage of an infringement process, normally initiated when member states fail to implement EU law properly. The Commission said they have two months to comply and correct. 

If they do not succeed, the EU executive can intensify the problem with a reasoned opinion – more extreme warnings that could lead to the case being heard before the Court of Justice of the European Union.

The Commission is also closing 72 cases in which the issues with the member states concerned have been resolved. In these cases, the Commission does not have to pursue the infringement procedure further.

Why the EU is pushing crypto tax transparency

At the heart of the dispute is an EU directive that broadens tax transparency rules to include crypto-assets. The directive requires member states to enact laws requiring crypto-asset service providers (such as exchanges and custodial wallet providers) to submit certain user and transaction data to national tax authorities. 

Those moves are intended to help the government detect tax evasion, tax fraud, and tax avoidance associated with digital assets, the Commission said. Crypto transactions, by their nature, can cross borders quickly and anonymously, making them less traceable under traditional tax regimes. 

The rules are intended to catch up with developments in financial markets, the Commission said, noting that proper execution is vital to the effective inter-governmental cooperation among the EU’s tax authorities.

While the directive was agreed upon at the EU level, member states must enact national laws and create systems to ensure the rules work in practice. The Commission’s actions indicate that, despite ample time, many countries have delayed or only partially implemented the necessary changes.

EU flags Hungary over MiCA compliance concerns

In the same infringement package, the European Commission also raised concerns about Hungary’s adherence to the EU’s flagship crypto regulation, the Markets in Crypto-Assets (MiCA) framework. 

The Commission said it had sent a separate letter of formal notice to Hungary over changes to its national law that affect so-called exchange validation services. 

According to the EU executive, these changes have led some crypto-asset service providers to suspend or stop offering certain services in the country. While Hungary has argued that the amendments aim to strengthen anti-money laundering and counter-terrorism financing (AML/CFT) safeguards, the Commission warned that national rules must remain compatible with MiCA. 

“While Hungary aims to strengthen anti-money laundering (AML/CFT) safeguards, such measures must remain compatible with MiCA,” said the European Commission.

If Hungary does not resolve the Commission’s concerns by the two-month deadline, the matter may also proceed to the next phase of the infringement proceedings. 

Since EU lawmakers enacted MiCA in 2023, all requirements for token issuers and crypto asset service providers have been phased in over successive stages to allow companies time to align. Under that regulatory framework, most crypto companies with operations before December 2024 must comply with all MiCA requirements or stop providing services by July 1 at the latest. Nevertheless, some member states have shortened this compliance window.

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