Filenews 12 January 2026
A new era from this year for cryptocurrency transactions, as they cease to be "invisible" for tax purposes within the European Union and in essence the way they are treated for tax purposes does not change, but the way they are dealt with by the audit. Cyprus has become an attractive destination for cryptocurrency investments, offering a favourable tax environment and low tax rates, especially for companies. As the use of cryptocurrencies increases, understanding their tax treatment is essential for complying with laws and maximizing the tax benefits available.
With the activation of the European Cryptocurrency Directive DAC8 from January 1, 2026, tax authorities are getting for the first time a systematic picture of a field that until now has been largely off the audit radar.
The DAC8 proposal focuses on the exchange of information on the profits generated from cryptocurrency trading. The cryptocurrency market, although relatively new, has grown significantly in recent years and has fundamentally changed the world of payments and investments.
The issues that the tax administrations of the Member States are called upon to deal with by the rapid increase in transactions through cryptocurrencies are:
How should income from the exchange of crypto-assets be treated for tax purposes?
Should value added tax (VAT) be levied between transactions?
Because cryptotechnology is a new process in itself and is still changing, Member States are finding it difficult to come up with up-to-date and uniform tax legislation, and most of them have so far not issued any tax guidance in relation to cryptocurrency exchanges.
Trading in the crypto market is done without the involvement of classic financial institutions, such as banks, and without a central authority. Mobility in the crypto market also makes it possible to trade the same crypto asset multiple times a day. The often high volatility in the value of crypto assets does not facilitate the expensive tax burden. All of this makes it particularly difficult for tax authorities to have an accurate overview of the transactions made and the profits made by these investors.
The proposed directive proposes measures for the exchange of information on cryptocurrency transactions and also includes a number of other changes to take into account OECD recommendations.
The European Commission estimates that the introduction of a reference framework for cryptocurrency transactions in the EU could increase additional tax revenues of between €1 billion and €2.4 billion per year.
Despite the expectations that often accompany such interventions, 2026 is not a year of immediate implementation, but of adaptation. Businesses are called upon to set up infrastructure, train staff and integrate processes that will begin to yield the required information in the coming years. European experience itself shows that such systems take time to function smoothly. The first substantial exchanges of information and the full picture are expected gradually. This makes it crucial how businesses and supervisors manage the transition period so that compliance does not become a factor in market destabilisation.
Who bears compliance costs
One of the key concerns that emerge concerns the unequal distribution of compliance costs. Large platforms and organized providers already have compliance departments in place and can absorb new requirements more easily. For smaller businesses, however, the cost of adaptation can prove disproportionate. New hires, external consultants, and investments in systems may act as a barrier, leading to market overconcentration. This debate is not just about cryptocurrencies. It touches more broadly on how tax transparency affects competition and the structure of new markets. The European experience of previous automatic exchange of information regimes itself shows that the costs of compliance are not negligible. In similar tax obligations, businesses needed to increase their administrative staff by 5% to 10% within the first two years of implementation, mainly in regulatory compliance, tax documentation and data management roles. For the cryptocurrency space, where many businesses operate with small and flexible teams, even a limited increase in staff or external consultants can turn into a substantial operational burden.
