Financial institutions (FIs) and other service providers who deal in crypto-assets should be aware of a new tax compliance framework for these investments and reporting of certain transactions. The Crypto-Asset Reporting Framework, which was released by the Organization for Economic Co-operation and Development (OECD) on October 10, 2022, includes rules and commentary that can be transposed into domestic law for the reporting and exchange of information related to crypto-assets. In addition to this framework, the OECD has also proposed certain adjustments to the Common Reporting Standard (CRS) to cover new digital financial products and to interact with its new framework. The framework and CRS amendments have been finalized and agreed to by 38 member countries of the OECD, along with the G20 countries. Note that a suggested implementation date has not yet been announced.
It is expected that Finance will likely draft legislation to implement changes based on the framework at some point in the future. To prepare for this change, FIs should consider how the rules in the framework may affect their current operations, and whether they already collect some of this information to meet other obligations. Some service providers that do not currently have to report under the FATCA/CRS rules may have to report crypto-assets under the OECD framework, and may require additional preparation time to understand their obligations.
The OECD launched public consultations on a new global tax transparency framework for crypto-assets in April 2022. At that time, the OECD notes that the framework was developed in response to the G20’s request for guidance.
Countries can implement the OECD’s Crypto-Asset Reporting Framework to collect information from reporting crypto-asset service providers with a relevant nexus to the implementing jurisdiction. Key aspects of the new proposed framework include:
- Scope of crypto-assets to be covered
- Scope of entities and individuals that are subject to data collection and reporting requirements
- Scope of transactions that are subject to reporting
- Information to be reported in respect of such transactions
- Due diligence procedures to identify crypto-asset users and to determine the relevant tax jurisdictions for reporting and exchange purposes.
The OECD has also proposed a number of amendments to the CRS so that they account for new digital financial products (i.e., specified electronic money products and central bank digital currencies) and ensure an efficient interaction between the CRS and the new crypto-asset framework in order to avoid duplicative reporting. These proposals also include enhanced due diligence requirements as well as miscellaneous changes to increase consistency in the application of the CRS and to incorporate previously released “Frequently Asked Questions” and other interpretative guidance. Additional information will be required to be reported under the CRS rules including the following:
- Role of controlling persons
- Whether the account is pre-existing or new and if a valid self-certification was obtained
- Whether the account is a joint account and the number of joint account holders
- Type of financial account.
For more information, contact your KPMG adviser.
Information is current to October 24, 2022. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500