- OECD has created a framework for the automatic exchange of information on crypto-assets
- The service provider must collect and report relevant information required by the authorities to comply with the CARF reporting requirements
- A Reporting Crypto-Asset Service Provider is required to report the information to each jurisdiction where it meets the criteria
The OECD has created a framework for the automatic exchange of information on crypto-assets between countries. The Crypto-Asset Reporting Framework (CARF) will be presented for discussion to G20 Finance Ministers and Central Bank Governors at their next meeting on October 12-13 in Washington, D.C.
CARF will be a separate framework designed to report data on Crypto-Assets in order to address tax compliance risks.
The market for Crypto-Assets is rapidly expanding.
CARF has been proposed in response to the rapid adoption of crypto-assets for a variety of investment and financial purposes. The use of cryptography and distributed ledger technology allows for decentralised transactions without the involvement of traditional financial intermediaries or central administrators and that has been a worry area for Regulators globally.
On the other hand, cryptocurrency market has given rise to a new set of intermediaries such as cryptocurrency exchanges and wallet providers, who are subject to limited regulatory oversight.
The Crypto-Asset market poses a significant risk by gradually eroding recent gains in global tax transparency as the transactions are difficult to be tracked. Transactions can be executed, and assets can be transferred digitally without meeting the previews of Country specific regulatory tax jurisdiction and compliance.
The crypto-asset sector has reduced the visibility of tax administrations on tax-relevant activities.
It is difficult for authorities to verify whether tax liabilities have been properly reported and assessed in the case of digital assets. Furthermore, there has been an increase in the use of crypto assets for money laundering and other illegal purposes.
The CARF requires Crypto-Asset Service Providers to follow due diligence procedures. Service providers must report transactions in such a way that they identify Crypto-Asset Users in order to determine tax jurisdictions.
The service provider must collect and report relevant information required by the authorities to comply with the CARF reporting requirements.
The due diligence requirements are intended to enable Reporting Crypto-Asset Service Providers to determine the identity and tax residence of their Individual and Entity Crypto-Asset Users, as well as the natural persons controlling certain Entity Crypto-Asset Users, in an efficient and reliable manner.
A Reporting Crypto-Asset Service Provider is required to report the information to each jurisdiction where it meets the criteria.
Galactik Views