Millions in losses for Dutch cryptocurrency companies due to new tax law
The new tax law for cryptocurrencies in the European Union, known as DAC8, will cost the Dutch tax authorities and cryptocurrency companies tens of millions of euros annually, with limited benefits, according to reports from Financieele Dagblad (FD) based on advice from the Council of State and the tax authorities. The Dutch parliament is set to discuss the bill after the summer break.
Under DAC8, cryptocurrency companies must report all customer transactions to tax authorities. Although the expected revenues at the EU level range from 1 billion to 2.4 billion euros annually, the impact of the law in the Netherlands will be limited, as the Dutch tax authority taxes assets based on their value on January 1 — data not covered by DAC8.
The tax authority stated that DAC8 transaction data cannot be directly integrated into tax returns and will require lengthy and costly analysis, making its practical value for citizens and businesses low. The preparation for implementing the law will initially cost 8 million euros, with annual expenses exceeding 17 million euros, in addition to the need to hire 126 additional employees, including analysts in the field of digital currencies, who are rare in the labor market.
Cryptocurrency companies like Bitvavo and Blox will face heavy burdens, as each company may need up to 1.5 million euros for preparation and around 150,000 euros annually for compliance. The tax authority warned that regulations will strain operational capacities and raise many practical questions.
The Dutch Digital Currency Industry Association VBNL has expressed concerns about privacy, as DAC8 will allow the sharing of personal data and transaction data with tax authorities in the European Union, and storing it in a European database for 12 years. The Dutch Data Protection Authority criticized the law for the lack of clarity regarding the conditions under which this data can be processed later.
Experts also doubt DAC8's ability to eliminate tax evasion related to cryptocurrencies, as investors can hold their assets on platforms outside the European Union or hide them in private wallets and decentralized networks, making detection difficult.