On October 10, 2022, the Organization for Economic Cooperation and Development (OECD) released its new global tax transparency framework to provide for the reporting and exchange of information with respect to crypto-assets. It comes in the context of the rapid adoption of crypto-assets. Unlike traditional financial products, crypto-assets can be transferred and held without the intervention of banks and without any central administrator. 

The Crypto-Asset Reporting Framework (CARF) will provide transparency to crypto-asset transactions, through automatically exchanging this information with the jurisdictions of residence of taxpayers, in a standardized manner similar to the Common Reporting Standard (CRS). 

The OECD has also proposed a series of additional amendments to the CRS, intended to modernize its scope to cover digital financial products comprehensively and to improve its operation, taking into account the experience gained by countries. and businesses. 

For memory, earlier in 2022, the OECD published a public consultation document concerning the CARF as well as proposed amendments to the CRS for the automatic exchange of financial account information among countries. The October publication includes several of the points raised by the industry during the consultation, such as optional data, some threshold and transitional measures.  

The CARF and amendments to the CRS consist of two parts: 

Part I – Crypto-Asset Reporting Framework 

The new global tax transparency framework CARF provides for the collection and exchange of tax-relevant information among tax administrations, with respect to persons engaging in certain transactions in crypto-assets.

What is reportable:

  • Crypto-assets that can be held and transferred in a decentralized manner without the intervention of traditional financial intermediaries.
  • Asset classes relying on similar technology that may emerge in the future.
  • Relevant types of transactions 
    • Exchanges between crypto-assets and fiat currencies 
    • Exchanges between crypto-assets 
    • Transfers of crypto-assets 

Who is going to report:

  • Individuals and entities that, as a business, provide services to exchange crypto-assets against other crypto-assets, or for fiat currencies, must apply the due diligence procedures to identify their customers, and then report the aggregate values of the exchanges and transfers for such customers on an annual basis.

Part II – Amendments to the Common Reporting Standard 

The main changes in CRS : 

  • Extend the scope of CRS to cover electronic money products and central bank digital currencies.
  • Cover indirect investments in crypto-assets through investment entities and derivatives.
  • Provide an efficient interaction between the CRS and the CARF, to limit situations of duplicative reporting.
  • Improve the due diligence procedures and reporting outcomes aiming to increase the usability of CRS information for tax administrations and limit burdens on financial institutions.
  • Indirect investments in crypto-assets via derivatives and investment vehicles, as well as CBDCs, will be covered by CRS, rather than CARF. 

Next steps 

The OECD is working on an implementation package to put in place the appropriate mechanisms to automatically exchange information pursuant to the amended CRS, including the exchange frameworks and an updated XML schema. In addition, appropriate implementation timelines will be agreed. 

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