Publication on Crypto-Asset Reporting Framework and Amendments to Common Reporting Standard by OECD
Crypto-Asset Reporting Framework and Amendments to Common Reporting Standard was approved by the Committee on Fiscal Affairs on 26 August 2022 and prepared for publication by the OECD Secretariat.
This publication contains the rules and commentary of the Crypto-Asset Reporting Framework (“CARF”) and a set of amendments to the Common Reporting Standard (“CRS”), as approved by the OECD Committee on Fiscal Affairs in August 2022.
The CARF, developed in light of the rapid growth of the Crypto-Asset market and pursuant to a mandate from the G20, provides for the reporting of tax information on transactions in Crypto-Assets in a standardised manner, with a view to automatically exchanging such information with the jurisdictions of residence of taxpayers on an annual basis. The CARF consists of rules and commentary which set out: i) the scope of Crypto-Assets to be covered; ii) the Entities and individuals subject to data collection and reporting requirements; iii) the transactions subject to reporting, as well as the information to be reported in respect of such transactions; and iv) the due diligence procedures to identify Crypto-Asset Users and Controlling Persons, and to determine the relevant tax jurisdictions for reporting and exchange purposes.
The amendments to the CRS, which was first published by the OECD in 2014 and designed to promote tax transparency with respect to financial accounts held abroad, bring in its scope certain electronic money products and Central Bank Digital Currencies. In light of the CARF, changes have also been made to ensure that indirect investments in Crypto-Assets through derivatives and investment vehicles are now covered by the CRS. In addition, amendments have been made to improve the operation of the CRS based on the experience gained by governments and business in over 100 jurisdictions that have implemented the CRS, including by strengthening its due diligence and reporting requirements and providing a carve-out for genuine non-profit organisations.
Abbreviations and acronyms
AML Anti-Money Laundering
API Application Programming Interface
ATM Automated Teller Machine
CARF Crypto-Asset Reporting Framework
CBDC Central Bank Digital Currency
CBI Citizenship by Investment
CRS Common Reporting Standard
FATCA Foreign Account Tax Compliance Act
FATF Financial Action Task Force
IT Information Technology
KYC Know Your Customer
LEI Legal Entity Identifier
NFE Non-Financial Entity
NFT Non-Fungible Token
OECD Organisation for Economic Cooperation and Development
RBI Residence by Investment
TIN Taxpayer Identification Number
XML Extensible Mark-up Language
Executive summary
The Common Reporting Standard was designed to promote tax transparency with respect to financial accounts held abroad. Since the CRS was adopted in 2014, over seven years have passed, in which over 100 jurisdictions have implemented the CRS and financial markets have continued to evolve, giving rise to new investment and payment practices. The OECD, working together with G20 countries, has therefore conducted the first comprehensive review of the CRS in consultation with participating jurisdictions, financial institutions and other stakeholders.
This has resulted in two outcomes:
- a new tax transparency framework which provides for the automatic exchange of tax information on transactions in Crypto-Assets in a standardised manner with the jurisdictions of residence of taxpayers (referred to as the “Crypto-Asset Reporting Framework” or “CARF”); and
- a set of amendments to the CRS.
Crypto-Asset Reporting Framework
One major development that the OECD has sought to address is the emergence of Crypto-Assets, which can be transferred and held without interacting with traditional financial intermediaries and without any central administrator having full visibility on either the transactions carried out, or the location of Crypto-Asset holdings.
These developments have reduced tax administrations’ visibility on tax-relevant activities carried out within the sector, increasing the difficulty of verifying whether associated tax liabilities are appropriately reported and assessed, which poses a significant risk that recent gains in global tax transparency will be gradually eroded. In light of the specific features of the Crypto-Asset markets, the OECD, working with G20 countries, has developed the CARF, a dedicated global tax transparency framework which provides for the automatic exchange of tax information on transactions in Crypto-Assets in a standardised manner with the jurisdictions of residence of taxpayers on an annual basis.
The CARF consists of rules and commentary that can be transposed into domestic law to collect information from Reporting Crypto-Asset Service Providers with a relevant nexus to the jurisdiction implementing the CARF. These rules and commentary have been designed around four key building blocks: i) the scope of Crypto-Assets to be covered; ii) the Entities and individuals subject to data collection and reporting requirements; iii) the transactions subject to reporting, as well as the information to be reported in respect of such transactions; and iv) the due diligence procedures to identify Crypto-Asset Users and Controlling Persons and to determine the relevant tax jurisdictions for reporting and exchange purposes.
Amendments to the Common Reporting Standard
Developed alongside the CARF, the first comprehensive review of the CRS has resulted in amendments to bring new financial assets, products and intermediaries within its scope, because they are potential alternatives to traditional financial products, while avoiding duplicative reporting with that foreseen in the CARF. Additional amendments have also been made to enhance the reporting outcomes under the CRS, including through the introduction of more detailed reporting requirements, the strengthening of the due diligence procedures, the introduction of a new, optional Non-Reporting Financial Institution category for Investment Entities that are genuine non-profit organisations and the creation of a new Excluded Account category for capital contribution accounts. In addition, further details have been included in the Commentary to the CRS in a number of locations to increase consistency in the application of the CRS and to incorporate previously released Frequently-Asked Questions and interpretative guidance.
Next steps
Work is ongoing on an implementation package to ensure the consistent domestic and international application and effective implementation of the CARF. The implementation package will consist of a framework of bilateral or multilateral competent authority agreements or arrangements for the automatic exchange of information collected under the CARF, IT-solutions to support the exchange of information and a further elaboration of the requirements set out in Section V of the CARF.
Similarly, work will also progress to put in place the appropriate mechanisms to automatically exchange information pursuant to the amended CRS.
Finally, coordinated implementation timelines for both the CARF and amended CRS will be agreed.
