I dont know anything about this situation in the EU, but it sounds like it has nothing to do with chain privacy unless you intend to break the law. They probably just want sums and not UTXO's to be declared.

Chain privacy gains you nothing if you buy on regulated exchange. The sum is attached to your name. If you don't use an exchane, you still would be required to declare a sum. Gaining privacy means leaving the EU, not switching to a privacy coin.