New legislation has been proposed, which dictates that companies that process crypto transactions for European Union customers, regardless of their size, would have to report them for the purpose of tax.

A substantial package had been introduced that comprised of anti-tax evasion measures and the said policy is also part of it.

It highlighted that even if the crypto-asset operators are non-European, they would still have to report their transactions if they are catering to EU residents.

The policy

As per the policy, companies would have to disclose personal information of their users to tax authorities, which include where and when they were born and where they reside.

Apart from this, they would also have to share the amount of money spent on crypto purchases, as well as what they receive from the seller.

The directive was outlined in a document and policymakers said that obligating people to report the income they generate via crypto investments would allow member states of the EU to calculate the taxes they are owed more accurately.

This would help the countries in generating more income of about 2.4 billion euros. The European Commission said that the crypto industry would also benefit from common reporting rules.

The proposal said that when there is transparency on the profits that are generated by crypto investors, it would assist traditional assets in benefiting from a more even playing field.

The impact

Implementing the new rules would cost the EU about 300 million euros initially and then they would also have to spend 25 million every year.

As far as the businesses that would be affected are concerned, policymakers state that the impact would be limited on small and medium-sized companies.

This is because the information that has to be reported is already available to them. The Council said that even though there will be compliance costs associated with the initiative, it is a good move.

It said that small and medium sized enterprises would benefit because there would be one set of rules applicable throughout the EU, so they will not have to deal with different requirements everywhere.

Crypto advocates

However, industry advocates do not welcome the regulation because they are worried that it would add undue burden on crypto firms that are operating in the EU.

Simon Polrot, the President of the European Crypto Initiative, said that the information that Crypto Asset Service Providers (CASPs) have been asked to provide is extremely complex and significant to calculate.

He said that they have underestimated the cost that service providers would have to bear and there is an enormous mass of information that would have to be shared.

He also questioned if the tax authorities in the member states have the capability of processing so much information.

Feedback on the proposal can be given for about eight weeks, after which it will be submitted to the European Council and the European Parliament as part of the debate.

The European Union is currently working on finalizing its historic crypto regulation package that has been dubbed MiCA, or Markets in Crypto Assets.

The purpose of the bill is to create a framework that would be used for regulating crypto services across all member countries.

Voting on the bill is expected to take place in February of the coming year.