The Organization for Economic Co-operation and Development (OECD) has released its new tax reporting framework, the Crypto-Asset Reporting Framework (CARF), according to a press release Monday.
The framework, which was approved in August, ensures "the collection and automatic exchange of information on transactions for relevant crypto," the report said. The definition of crypto assets "includes assets that can be held and transferred in a decentralised manner, without the intervention of traditional financial intermediaries, including stablecoins, derivatives issued in the form of a crypto-asset and certain non-fungible tokens," the report said.
Intermediaries and other service providers facilitating exchanges between relevant crypto assets, such as exchanges, brokers and ATM operators, will also be included in the scope.
"The current scope of assets, as well as the scope of obliged entities, covered by the Common Reporting Standard (current standards) do not provide tax administrations with adequate visibility on when taxpayers engage in tax-relevant transactions in, or hold, relevant crypto assets," the report said. Hence, the OECD has created this new framework.
CARF was developed in light of the crypto industry's rapid growth. Last year, the industry went from having a market capitalization of $715 billion in January to nearly touching $3 trillion before plummeting this year. In addition, these developments are in line with the recent developments in the global anti-money laundering standards from the Financial Action Task Force.
However, in May, the crypto industry pushed back on tax reporting measures for cryptocurrencies at an OECD meeting.
The CARF sets rules that crypto asset firms must report in the country that they conduct business in. Exchanges between relevant crypto assets and fiat currencies, along with exchanges between one or more type of crypto and transfers of crypto (including retail payment transactions), will need to be reported.
Like the OECD's Common Reporting Standard (CRS), the framework's due diligence process requires both the individual and entity customers and controlling persons to identify themselves. Indirect investments in crypto assets via derivatives and investment vehicles are now also covered by the CRS. Amendments were also made to include central bank digital currencies in the CRS, rather than in the CARF. The CRS sets out the financial account information to be exchanged and reported, plus due diligence procedures.
Alongside these rules "work is ongoing on an implementation package to ensure the consistent domestic and international application of the CARF," the report noted.
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