OECD crypto-asset reporting framework: joint statement

In an important step forward towards exchange of information on transactions in crypto-assets, 48 jurisdictions have released a joint statement confirming that they intend to implement the OECD crypto-asset reporting framework (CARF) by 2027. CARF provides for the automatic exchange of information on crypto-assets, similar to the way in which the Common Reporting Standard (CRS) provides for exchange of information on financial accounts. The signatories include the UK, USA, Canada and most EU member states.

Background

In June 2023, the OECD published the final version of its Crypto-Asset Reporting Framework and 2023 update to the Common Reporting Standard (CRS). The Crypto-Asset Reporting Framework (CARF) was developed in response to a mandate from the G20 and in the light of the rapid growth of the crypto-asset market and provides for the reporting of information on transactions in crypto-assets in a standardised manner, with a view to automatically exchanging such information with the jurisdictions of residence of taxpayers on an annual basis.

The CRS consists of a global framework for reporting and automatically exchanging information relating to financial accounts and was adopted in 2014. In contrast, the recent growth in the use of crypto-assets has led to concerns that tax authorities do not have sufficient information relating to similar transactions that take place in crypto-assets which can be used for a wide range of investment and financial purposes. Unlike traditional financial products, crypto-assets can be transferred and held without the intervention of traditional financial intermediaries, such as banks, and without any central administrator having full visibility on either the transactions carried out or on crypto-asset holdings. The crypto-asset market has also given rise to new and unregulated intermediaries and service providers, such as crypto-asset exchanges and wallet providers.

The OECD was therefore mandated to develop a complementary compliance framework to address this issue. As a result, the CARF rules contain similar model rules and commentary to the CRS, which can be enacted in domestic legislation. For further details, see our Insights item.

Recent developments

Following the delivery of CARF to the G20, the G20 has asked the Global Forum on Transparency and Exchange of Information for Tax Purposes to build on its commitment and monitoring processes to ensure the widespread implementation of the CARF by relevant jurisdictions. Since the finalisation of CARF in June 2023, the Global Forum has established a dedicated "CARF Group" to take the work forward. The crypto-asset reporting issue will be further discussed at the Global Forum's 16th Plenary Meeting taking place in Lisbon, Portugal from 29 November to 1 December 2023.

Most recently, 48 jurisdictions have published a Joint Statement committing to implement CARF, including the UK. In particular, the statement notes that the widespread, consistent and timely implementation of the CARF will further improve the ability to ensure tax compliance and clamp down on tax evasion, which reduces public revenues and increases the burden on those who pay their taxes.

The 48 jurisdictions commit to work towards swiftly transposing the CARF into domestic law and activating exchange agreements in time for exchanges to commence by 2027, subject to national legislative procedures as applicable.

Finally, the Statement invites other jurisdictions to "join us with a view to enhancing the global system of automatic information exchange which leaves no hiding places for tax evasion".

Implementation

The CARF model contains a Multilateral Competent Authority Agreement (MCAA). The CARF MCAA provides for the automatic exchange of information collected under the CARF with jurisdiction(s) or residence of Crypto-Asset Users and is based on Article 6 of the Convention on Mutual Administrative Assistance in Tax Matters. As an alternative to the CARF MCAA, jurisdictions can also establish automatic exchange relationships through bilateral competent authority agreements based on bilateral double tax treaties or tax information exchange agreements that permit the automatic exchange of information, or the Convention on Mutual Administrative Assistance in Tax Matters.

The EU Commission proposed the introduction of crypto-asset reporting rules in December 2022 as an amendment to the existing Directive on Administrative Co-operation (DAC8). In May 2023, the Economic and Financial Affairs Council reached agreement on a general approach to the rules, consistent with the OECD CARF, with a proposed date for introduction of January 2026. The legislative proposal requires unanimous support and is currently in the process of consideration by the EU Parliament.