Identifying a standard for the automatic exchange of information to cryptocurrencies to prevent recent progress in international tax transparency from being undermined by the use of cryptocurrency operations (some of these operations do not fall under the CRS),
This is the request that emerged in the last G20, which has identified the need for a system of automatic exchange of information between countries about crypto-assets.
At the beginning of October 2022, the OECD presented a new global framework of tax transparency called the Crypto-Asset Reporting Framework (CARF) which will operate on reporting and exchanging information on crypto-assets. The analysis of the Framework proposed by the OECD continues in this article.
Which professionals will be concerned
The professionals and companies required to submit information under the CARF are intermediaries and other service providers that facilitate exchanges between Crypto-assets. Obliged subjects also include brokers and resellers of cryptocurrencies as well as operators of cryptocurrency ATMs. All the subjects identified above, whether they are companies or individuals, would be required to transmit reports to the CARF.
Transactions subject to reporting
The CARF provides that the following three types of transactions are subject to reporting:
- exchanges between relevant Crypto-assets and fiat currencies;
- exchanges between one or more forms of relevant Crypto-assets.With this last term any crypto-asset that is not a digital central bank currency, a specified electronic money product or any crypto-asset for which the reporting cryptocurrency service provider has sufficiently established that it cannot be used for payment or investment is indicated;
- transfers, including retail payments, of relevant Crypto-assets.
The CARF and the amendments to the CRS
The CARF contains standard rules, which can be adopted in the national legislation of individual countries, and comments to assist various administrations in their implementation.
The OECD has also simultaneously prepared a series of amendments to the CRS, intended to modernize its scope of application to fully cover digital financial products and to improve its operation, taking into account the experience gained by countries and businesses.
The next phases foreseen by the work program of the Organization for Economic Cooperation and Development are the development of legal and operational tools to facilitate the widespread and effective international exchange of information, in addition to defining the times for the start of automatic exchange.
Cryptocurrencies and the Common Reporting Standard
The Common Reporting Standard was adopted in 2014 to promote tax transparency concerning financial accounts held abroad and provides for the automatic collection and exchange of information on the identity of account holders, as well as the balance and income paid or credited on accounts.
According to the OECD, as of 2021, the CRS has enabled the exchange of information on more than 111 million financial accounts, allowing for a borderless fight against international tax evasion (see article Global Forum: 114 billion from transparency and exchange of information).
The effort of the OECD and G20, which aims to identify a standard for the automatic exchange of information about crypto-assets, and the concurrent amendment to the Common Reporting Standard should ensure an optimal framework of tax transparency despite the intrinsic characteristics of the cryptocurrency financial market