common law on the monitoring and taxation of cryptos in Europe
The European Commission proposes to systematize electronic invoicing, to create new reporting obligations for platforms and to facilitate the registration of SMEs. He also wants to track transactions in crypto assets, which fly under the radar these days.
Update old European devices
The current VAT system in Europe is only three decades old, but despite recent improvements, especially regarding e-commerce, it is no longer suitable for today’s world.
The platform economy model, the flow of trade caused by accelerated globalization and the emergence of crypto assets are shaking up taxation.
According to the European Commission, the system allowed the evaporation of a form of VAT, with Member States losing 93 billion euros in uncollected revenue in 2020. A quarter of this amount can be attributed to fraud.
This additional tax revenue will be welcomed as member states try to cover deficits caused by the effects of the Covid crisis and the war in Ukraine, including energy inflation.
To achieve this, Economy Commissioner Paolo Gentiloni proposed on Thursday to update a set of existing texts to “adapt to the digital age”, which would make life easier for small and medium-sized businesses and include the platform in short-term rental contracts and sharing of mobile services on an equal footing with competing traditional service providers.
For example, in this proposal, the European Commissioner wants to guarantee that any exchange of goods between companies within the EU must be the subject of an electronic invoice. This is to identify and better understand where exchanges are taking place.
This new system could generate 11 billion euros in revenue over ten years. It is also based on several other points, including the fact that collaborative economy platforms are required to collect VAT while others are not.
Similarly, registration systems for e-commerce also need to be expanded. So-called “traditional” companies must use a single portal, benefiting from a single registration for all their activities within the EU. This change will be a way to save SMEs 8.7 billion euros over a decade.
Crypto hunt is on
From January 1, 2026, any company providing cryptocurrency-related services, such as an exchange or broker, will be required to report all its transactions from the moment the service is provided to European residents. It doesn’t matter the size of the company or the region in the world where it is located.
This new tax will apply to all assets issued in a decentralized manner. Therefore, it also includes stablecoins and NFTs (non-fungible tokens).
The European Commission also recommends monitoring the activities of wealthy individuals, especially when related to transit between different countries. All this is with the aim of helping the fiscal authorities to collect taxes better.
The committee also wants to tackle the growing volume of cryptocurrency transactions, which are largely under the watchful eye of tax authorities.
Of course, the bill is not there yet. It must go through all the stages before it can be declared. Thursday’s proposal will now go to the EU Council of Ministers in consultation with MEPs.
Therefore, each representative of a member state of the European Council must approve the new regulations in order to implement them. Therefore, the horizon that seems to be emerging will be the beginning of 2026.
With the arrival of the MiCa text and additional taxes on companies (even those not incorporated in the EU), it seems to confirm the EU’s desire to deal with crypto assets.