The Relationship and Differences Between DAC8 and CARF Frameworks

The Relationship and Differences Between DAC8 and CARF Frameworks

DAC8 draws heavily from CARF, maintaining consistency in core principles and incorporating OECD's proposed amendments to the CRS. To some extent, DAC8 can be seen as the EU's legislative implementation of the CARF framework within its member states.

The main differences between the two are as follows:

Effective Date: CARF currently does not have a specific effective date, whereas DAC8 will come into effect on January 1, 2026, for Crypto-Asset Service Providers (CASPs).

Registration Requirements: DAC8 mandates that non-EU CASPs providing crypto services to the EU must register with an EU member state and comply with the Anti-Money Laundering (AML) and reporting requirements of that member state. In contrast, CASPs in non-EU jurisdictions adopting CARF will be considered to be in a qualifying non-EU jurisdiction and will not be subject to this requirement.

Transaction Blocking Rules: DAC8 imposes strict transaction blocking rules. Under DAC8, if a CASP does not obtain the required information within 60 days, it must block the crypto-asset user from conducting transactions. CARF does not have such a provision.

Reporting Information Privacy Protection: DAC8 requires CASPs to inform reportable users that their provided data will be used for reporting purposes and to send all reporting information to the reportable users before submitting the data to tax authorities. CARF does not have this requirement.

In summary, while DAC8 and CARF share common goals and principles in enhancing tax transparency and combating tax evasion, they differ in specific implementation details.