The Crypto Asset Reporting Framework (CARF) responds to a G20 request that the OECD develop a framework for the automatic exchange of information between countries on crypto assets.
The new transparency initiative, developed together with the G20 countries, arises in the context of a rapid adoption of the use of crypto assets for a wide range of investments and financial uses. Unlike traditional financial products, crypto assets can be transferred and held without the intervention of traditional financial intermediaries, such as banks, and without any central administrator having complete visibility into transactions made or crypto asset holdings. The crypto market has also given rise to new intermediaries and service providers, such as crypto asset exchanges and wallet providers, many of which are currently unregulated..
These developments mean that crypto assets and related transactions are not comprehensively covered by the OECD/G20 Common Reporting Standard (CRS), increasing the likelihood of their use for tax evasion and undermines the progress made in fiscal transparency through the adoption of the CRS.
“The Common Reporting Standard has been very successful in combating international tax evasion. In 2021, more than 100 jurisdictions exchanged information on 111 million financial accounts, covering total assets of €11 trillion”, said the secretary general of the OECD, Mathias Cormann. “LToday’s launch of the new crypto asset reporting framework and amendments to the Common Reporting Standard will ensure that the tax transparency architecture remains current and effective“.
In this sense, the CARF will guarantee transparency with respect to cryptoactive transactions, through the automatic exchange of such information with taxpayers’ jurisdictions of residence on an annual basisin a standardized way similar to the CRS.
The CARF will target any digital representation of value that relies on a cryptographically secure distributed ledger or similar technology to validate and secure transactions.. Carve-outs are provided for assets that cannot be used for payment or investment purposes and for assets that are already fully covered by the CRS. Entities or individuals providing services that carry out exchange transactions in crypto assets for, or on behalf of, customers would be required to report under CARF.
The CARF contains model rules that can be transposed into national legislation and commentaries to assist administrations with implementation. Over the coming months, the OECD will advance work on the legal and operational instruments to compile the international exchange of information on the basis of CARF and to ensure its effective and widespread implementation, including the timing to initiate exchanges under CARF.
The OECD has also submitted to the G20 a set of additional amendments to the CRS, aimed at modernizing its scope to comprehensively cover digital financial products and improve its operation., taking into account the experience gained by countries and companies. As with the CARF, this work will be complemented by an update of the international legal and operational mechanisms for the automatic exchange of information in accordance with the amended CRS, as well as a coordinated timetable to bring the agreed amendments into force.
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