For more than a decade, the Directive on Administrative Cooperation (DAC) has been one of the central pillars of the EU’s tax transparency framework. Introduced in 2011, DAC sets rules that allow EU countries' Tax Authorities to exchange information more effectively and cooperate in combating tax fraud, tax evasion, and aggressive tax planning.

However, as the business models, financial activities, and digital platforms evolved in recent years and became increasingly international and cross-border, the Tax Authorities found it more difficult to obtain accurate information about taxable persons’ activities outside their jurisdictions. In response, the EU expanded DAC through multiple amendments.

Each new set of amendments introduced new categories of information exchange, extending transparency obligations from financial accounts and multinational enterprises to tax intermediaries, digital platforms, crypto-assets, and global minimum taxation.

What Is the Directive on Administrative Cooperation (DAC)?

In the general sense, DAC establishes rules and procedures for cooperation between EU countries’ Tax Authorities. The main purpose of DAC is to improve the exchange of key tax-related information and ensure that taxable persons, either individuals or businesses, cannot exploit differences between national tax systems to avoid taxation.

With DAC mechanisms in place, such as the automatic exchange of information (AEOI), spontaneous exchange of information (SEOI), and exchange of information on request (EOIR), EU countries can more effectively ensure that foreign income is subject to tax. 

The AEOI involves the systematic and periodic exchange of predefined categories of taxable persons' information between the EU countries' Tax Authorities. Under AEOI, EU countries are required to collect specific types of information from taxable persons, financial institutions, and other reporting entities, and share this data with the Tax Authorities of the EU country where relevant taxable persons are located or have tax obligations.

The EOIR is used when a Tax Authority in one EU country requires specific information about a particular taxable person or tax matter from another EU country. To obtain the necessary data, the Tax Authority in one EU country must submit a formal request to the Tax Authority in another EU country, asking for relevant information that may help determine the taxable person's tax obligations.

SEOI, on the other hand, occurs when a Tax Authority voluntarily provides information to another EU country without receiving a prior request. This happens when a country identifies information that may be relevant or useful for another EU country, such as details indicating potential tax risks, cross-border transactions, or arrangements affecting taxable persons in another jurisdiction. Unlike EOIR, SEOI is not triggered by a specific request but is initiated by the Tax Authority that discovered the relevant information.

Although DAC primarily applies to direct taxes, including personal income tax, corporate income tax, and similar taxes, its scope has expanded significantly to cover areas connected with financial transparency, digital business models, and international tax compliance.

Evolution of DAC: From DAC1 to DAC9

Since its adoption in 2011, DAC has undergone several revisions, each responding to new challenges in international taxation. The original version of DAC is commonly referred to as DAC1. 

DAC1 - Automatic Exchange of Information (AEOI)

DAC1 introduced the foundation for administrative cooperation by establishing rules for the automatic exchange of information. Under DAC1, Tax Authorities automatically exchange information relating to several categories of income and assets. These include employment income, directors’ fees, certain life insurance products not covered by other EU information exchange rules, pensions, ownership of and income from immovable property, royalties, and non-custodial dividend income that is not exempt from corporate income tax.

DAC2 - Automatic Exchange of Financial Account Information

DAC2 was the first amendment to DAC and introduced the automatic exchange of financial account information between EU countries. The main objective of DAC2 is to combat tax evasion and tax avoidance by ensuring that financial income earned abroad is subject to the same level of tax transparency as income generated domestically.

Under DAC2, financial institutions in each EU country are required to identify reportable accounts, collect specified financial information, and submit it annually to their national Tax Authority. The information includes account balances and financial income credited to the account, such as interest, dividends, proceeds from the sale or redemption of financial assets, and payments under certain cash-value insurance contracts. That information is then automatically exchanged with the Tax Authority of the account holder’s country of tax residence.

DAC3 - AEOI on Advanced Cross-Border Tax Rulings and Advance Pricing Arrangements (APAs)

In 2015, the EU updated DAC for the second time. The main objective of DAC3 is to ensure that Tax Authorities receive information on cross-border rulings and APAs issued by other EU countries so they can assess potential tax risks and determine whether further investigation or action is required. The scope of DAC3 covers all advanced cross-border tax rulings and APAs that fall within the Directive’s definition, regardless of the subject matter of the ruling or whether the related parties are established within or outside the EU.

The information that is exchanged under DAC3 includes the key characteristics of each ruling or APA rather than its full text. More specifically, under DAC3, Tax Authorities exchange details such as the identity of the taxable persons benefiting from the ruling, a summary of its contents, descriptions of the relevant business activities and cross-border transactions, the date of issuance or renewal, its period of validity, and the value of the transactions covered.

DAC4 - AEOI of Country-by-Country Reports

With DAC4, in 2016, the EU implemented the international country-by-country reporting standard developed under the OECD's Base Erosion and Profit Shifting (BEPS). The primary objective of DAC4 is to provide Tax Authorities with a clearer picture of the global activities, organizational structure, transfer pricing practices, and internal transactions of multinational groups.

DAC4 applies to multinational enterprise groups (MNEs) with annual consolidated revenue of at least EUR 750 million and operations in one or more EU countries. For each tax jurisdiction in which the group conducts business, the country-by-country report includes key financial and operational information, such as total revenue, profit before income tax, income tax paid and accrued, the number of employees, stated capital, retained earnings, and tangible assets.

DAC5 - Access to Beneficial Ownership Information

DAC5 aims to strengthen tax administrations' ability to identify taxable persons using complex ownership structures to conceal assets, income, or economic interests. To this end, it introduced a legal obligation for EU countries to give Tax Authorities access to beneficial ownership information collected under anti-money laundering (AML) legislation.

DAC6 - AEOI on Reportable Cross-Border Arrangements

Introduced in 2018 as the fifth amendment to DAC, DAC6 was designed to increase tax transparency by requiring the reporting of certain cross-border tax arrangements that may present risks of tax avoidance, tax evasion, or aggressive tax planning. DAC6 provided EU countries with an early warning mechanism to identify potentially abusive tax arrangements before significant tax revenue losses occur.

Reporting obligations primarily apply to intermediaries involved in designing, marketing, organizing, or implementing reportable cross-border arrangements, such as tax advisers, lawyers, accountants, and other professionals. The information collected under DAC6 is stored in a central database known as DAC6 Central Directory, which is not publicly available and can only be accessed by the competent Tax Authorities.

DAC7 - Reporting Rules for Digital Platforms

DAC7 entered into force in January 2023 and introduced new reporting obligations for digital platform operators to increase tax transparency in the digital economy and ensure that income earned through online platforms is properly reported to Tax Authorities. Rather than requiring individual sellers to provide information to multiple Tax Authorities, the system allows platform operators to serve as a central source of reliable data on commercial activities carried out through digital platforms.

DAC8 - Tax Transparency for Crypto-Assets

DAC8 applies from January 1, 2026, and introduces reporting obligations for crypto-asset service providers operating within the EU. These providers must collect information on reportable crypto-asset transactions carried out by EU users, including users residing in the same EU country as the provider.

DAC9 - OECD’s Pillar Two Global Minimum Tax Rules

The latest amendments to DAC, known as DAC9, introduce mechanisms for exchanging information related to the top-up tax system established under the OECD's Global Anti-Base Erosion (GloBE) Model Rules. The rules apply to MNEs and large domestic groups with annual consolidated revenues of at least EUR 750 million, which became subject to a minimum effective tax rate of 15%.

Future Developments of DAC in the EU

With all amendments to DAC, the EU showed its readiness to adapt to developing business, economic, and financial environments. Therefore, the EU's DAC legislation is expected to continue expanding as Tax Authorities increase their reliance on data-driven compliance systems. 

One of the most significant current developments is the proposed consolidation of DAC into a single piece of legislation. More specifically, the European Commission proposed a DAC recast that will eliminate duplications, resolve inconsistencies, and potentially remove or simplify reporting requirements that may be unnecessarily burdensome.