Luxembourg to Implement DAC8, Extending Tax Details for Cryptocurrency Transactions

Luxembourg Introduces New Tax Law to Enhance Cross-Border Reporting and Crypto Asset Regulation

The Luxembourg Government has published Draft Law 8592, which aims to transpose EU Directive 2023/2226 (DAC8) into the country's tax law. If enacted into law, the proposed provisions would apply from 1 January 2026.

The Draft Law introduces several changes to the existing tax legislation, with a focus on enhancing cross-border reporting and regulating crypto asset service providers.

Life Insurance Reporting Obligation

From tax periods beginning on or after 1 January 2026, the reporting obligation for life insurance products will apply to insurance benefits paid in taxable periods. This change is intended to expand the automatic exchange of information on income derived from certain life insurance products paid to beneficiaries resident in other EU Member States.

Crypto Asset Service Providers (RCASPs) and Crypto-Asset Operators

The scope of new reporting for RCASPs and Crypto-Asset Operators covers crypto-asset service activities such as management, custody, administration, exchange, and execution of orders. By 30 June of each year, RCASPs must report information in relation to the previous calendar year to the Luxembourg Tax Authorities.

RCASPs must collect and verify the information on crypto-asset users in line with reasonable due diligence procedures. To help prevent double reporting, the Draft Law provides an exemption from due diligence and reporting obligations if the RCASP fulfills DAC 8 obligations in another EU Member State or a jurisdiction with similar exchange of information agreements with Luxembourg.

Penalties for Non-Compliance

If a Crypto-Asset Operator fails to register in Luxembourg or an RCASP fails to report the required information within the legal deadline, a €5,000 penalty would apply. Furthermore, Tax Authorities may impose a penalty of up to €250k if it appears, following a control, that an RCASP did not meet its due diligence and reporting obligations.

Advance Cross-Border Rulings and Agreements

Starting from tax periods beginning on or after 1 January 2026, the Draft Law requires additional details to be exchanged for advance cross-border rulings and advance pricing agreements that are subject to exchange of information. From 1 January 2028, this requirement will also apply to transactions exceeding €1.5m (or the equivalent in another currency).

Amendments to Existing Laws

The Draft Law amends several existing laws to align with the new regulations. For instance, it amends the CRS Law to capture electronic money instruments and central bank digital currency instruments. It also amends the DAC7 Law to reduce the reporting burden if Platform Operators rely on a confirmed seller's identity and tax residence through identification services.

Expansion of Information Use

The Draft Law extends the allowed use of information exchanged under DAC beyond Luxembourg direct taxes. This information can now be used for the assessment, administration, and enforcement of Luxembourg Value Added Tax (VAT), other indirect taxes, customs duties, anti-money-laundering measures, and provisions to help counter the financing of terrorism.

Cross-Border Rulings

The Draft Law expands the automatic exchange of information to advance cross-border rulings on individuals issued, amended, or renewed from 1 January 2026, if either the individual is a tax resident under domestic law or the transactions covered by the cross-border ruling exceed €1.5m.

Amendment to DAC6 Law

The Draft Law amends the DAC6 Law to reflect the Court of Justice of the European Union's judgment in case C-694/20, dated 8 December 2022.

Information Sharing

The Luxembourg Tax Authorities will then share the locally reported information with tax authorities of the users' residence by 30 September of the calendar year following the year to which the information relates.

If enacted, these changes will significantly impact the crypto asset industry and cross-border tax reporting in Luxembourg. The first crypto-asset reporting and exchanges are expected in June and September 2027, respectively.

Luxembourg to Implement DAC8, Extending Tax Details for Cryptocurrency Transactions