OECD release public consultation document concerning Crypto-Asset Reporting Framework (CARF) and Amendments to the Common Reporting Standard (CRS)

27 April, 2022

In brief

On March 22, 2022, the Organisation for Economic Co-operation and Development (OECD) released a new global tax transparency framework, which introduces the automatic exchange of tax information on transactions in Crypto-Assets in a standardised manner (“Crypto-Asset Reporting Framework” or “CARF”) and also proposed amendments as part of the first comprehensive review of the the Common Reporting Standard (CRS).

The OECD is seeking public comments on the above proposals, which should be submitted by 29 April 2022. This alert will cover the proposed changes in more detail as these proposals signify a significant evolution of the existing exchange of information regimes and therefore businesses affected should begin to prepare for the changes on the horizon.

In detail

According to the World Economic Forum, as of March 2022 there are 18,142 crypto-currencies, 460 crypto-exchanges and the market cap of crypto-currencies amounts to USD 1.7 trillion. As crypto-currencies continue to spread across the globe, so too the regulations put in place to govern them.

The CRS, published by the OECD in 2014, is a key tool in ensuring transparency on cross-border financial investments and in fighting offshore tax evasion. However, in most instances Crypto-Assets will not fall within the scope of the CRS, which applies to traditional financial assets and fiat currencies. Even where Crypto-Assets may fall within the definition of financial assets, they can be owned either directly by individuals in cold wallets or via Crypto-Asset exchanges that currently do not have reporting obligations under the CRS, and are therefore unlikely to be reported to the tax authorities in a reliable manner.

Therefore, at the behest of G20, the OECD has developed a new global tax transparency framework for the automatic exchange of information on Crypto-Assets. The newly proposed Crypto-Asset Reporting Framework provides for the collection and exchange of tax-relevant information between tax administrations, with respect to persons engaging in certain transactions in crypto-assets.

The rules and commentary of the CARF have been designed around four key building blocks:

the scope of Crypto-Assets to be covered;
the intermediaries subject to data collection and reporting requirements;
the transactions subject to reporting as well as the information to be reported in respect of such transactions; and
the due diligence procedures to identify Crypto-Asset users and the relevant tax jurisdictions for reporting purposes.

A Crypto-Asset is defined broadly in the CARF as “a digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions”.

Further, the reference to a “similar technology” within the definition likely aims to ensure that the reporting requirements will cover new assets that may emerge in the future.

Next Steps

Now the OECD is seeking public comments on the above two proposals, that should be submitted no later than April 29, 2022. On the basis of the input received via this public consultation, the OECD plans to finalise the rules and commentary to the CARF and the amended CRS. The OECD will also develop the exchange instruments and technical solutions needed to support reporting and exchanges pursuant to the CARF and the amended CRS. It is the OECD’s intention to report back on the CARF and the amended CRS under the Indonesian Presidency of the G20 for its October 2022 meeting.

These proposals portray a significant change in the CRS and the evolution of automatic exchange of information between regimes and the way individuals and entities make investments.

How can PwC help?

PwC can assist you in meeting your CRS reporting obligations by providing you with the following services

We can assist you to assess the impact of CRS on your business and support you with meeting your CRS reporting obligations.
We can assist by completing a “health check” on your compliance with the requirements and, if necessary, advise on any appropriate disclosures to tax authorities.