Tax transparency framework for crypto-assets and amendments to CRS

The Organisation for Economic Cooperation and Development ("OECD") published (on March 22) a public consultation document concerning a new global tax transparency framework to provide for the reporting and exchange of information with respect to crypto-assets (Crypto-Asset Reporting Framework, or "CARF"), as well as proposed amendments to the common reporting standard ("CRS") for the automatic exchange of financial account information among countries.

According to the OECD, in recent years, individuals have rapidly adopted the use of crypto-assets for a range of investment and financial activities. However, unlike traditional financial products, crypto-assets can be transferred and held without the intervention of traditional financial intermediaries and without any central administrator having full visibility on either the transactions carried out, or crypto-asset holdings. Therefore, crypto-assets could be exploited to undermine existing international tax transparency initiatives, such as the CRS.

The 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. It covers crypto-assets that can be held and transferred in a decentralized manner, without the intervention of traditional financial intermediaries, as well as asset classes relying on similar technology that may emerge in the future. Under the CARF, 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.

Alongside the CARF, the OECD has also developed proposals as part of the first comprehensive review of the CRS, with the aim of further improving the operation of the CRS, based on the experience gained by governments and business over the past seven years since its adoption. The proposals would:

• Extend the scope of the 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, in particular to limit instances of duplicative reporting
• Improve the due diligence procedures and reporting outcomes, with a view to increasing the usability of CRS information for tax administrations and limiting burdens on financial institutions

Interested parties are invited to send comments no later than April 29, 2022.

A public consultation meeting will be held at the end of May 2022. The OECD then intends to report back on the CARF and the amended CRS under the Indonesian Presidency of the G20 for its October 2022 meeting.

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