The OECD has presented a new global tax transparency framework providing for the reporting and exchange of information relating to crypto-assets.
The Crypto-Asset Reporting Framework (CARF) responds to a G20 request for the OECD to develop a framework for the automatic exchange of information between countries on crypto-assets. The CARF will be reviewed by G20 finance ministers and central bank governors during their next meeting on October 12-13 in Washington DC, as part of the latest Secretary-General’s Tax Report. OECD.
The new transparency initiative, carried out in partnership with G20 countries, comes once morest the backdrop of the rapid adoption of crypto-assets for a range of uses in finance and banking. investment. Unlike traditional financial products, crypto-assets can be transferred and held without resorting to traditional financial intermediaries, such as banks, and without any central administrator having full visibility on the transactions carried out or on the location of crypto-asset holdings. Additionally, the crypto-asset market has spawned a new set of intermediaries and service providers, such as crypto-asset exchanges and wallet providers, many of which are unregulated.
As a result of these developments, crypto-assets and related transactions partly escape the OECD/G20 Common Reporting Standard (CRS), which increases the likelihood of them being used for tax evasion purposes and risks undermining the progress made in terms of tax transparency thanks to the adoption of the CRS.
“The Common Reporting Standard is a very effective tool in the fight once morest international tax evasion. In 2021, more than 100 jurisdictions exchanged information on 111 million financial accounts, involving nearly €11 trillion in total assets,” said OECD Secretary-General Mathias Cormann . “The new reporting framework for crypto-assets and changes to the Common Reporting Standard introduced today will ensure that the international tax architecture remains up-to-date and efficient.”
Likewise, the CARF will guarantee the transparency of transactions using crypto-assets, thanks to the automatic exchange of the corresponding information with the jurisdictions of residence of the taxpayers on an annual basis, in a standardized manner, according to modalities similar to the CRS.
CARF will target any digital representation of a value that relies on a cryptographically secured distributed ledger or similar technology used to validate and secure transactions. Exceptions are provided for assets that cannot be used for payment or investment purposes and for those that are already fully covered by the CRS. Natural or legal persons who provide services in the form of crypto-asset exchange transactions, for or on behalf of clients, would be subject to the reporting requirements referred to by the CARF.
The CARF contains model rules that can be transposed into domestic law, and commentaries intended to help administrations implement them. Over the coming months, the OECD will advance work on the legal and operational instruments to be adopted to facilitate the international exchange of information collected on the basis of the CARF in order to ensure its effective and large-scale deployment, including the start date of the exchanges planned by the CARF.
The OECD has also submitted to the G20 a series of additional amendments to the CRS, aiming to update its scope to cover all digital financial products and to improve its functioning, taking into account experience. acquired by the public authorities and by companies. Like 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, and by a coordinated definition of the timetable for taking effect of these changes.
