OECD Publishes Crypto-Asset Framework To Aid Tax Authorities

• OECD publishes a framework to aid tax authorities to implement tax regulations.
• The CARF addresses three phenomena prevalent in the industry.
• Exchanges or bodies related to crypto-asset transfer are required to report customer information to tax authorities.

The Organisation for Economic Co-operation and Development (OECD) published a framework that will help tax authorities implement tax regulation on taxpayers who invest in crypto-assets outside their country of tax residence. Chainalysis, a block analysis firm, shared the news of the OECD’s latest framework named: ‘Crypto-Asset Reporting Framework and Amendments’ to the Common Reporting Standard (CARF).

The CARF has been developed to address mainly three phenomena that they believe exist: Firstly, according to public reports, many local taxpayers seem to be not satisfying their tax obligations arising from crypto transactions. Secondly, a significant portion of the activity that involves digital assets is cross-border in nature. And finally, the CARF focuses on taxpayers’ transactions from personal wallets. 

Hence, having considered all the aforementioned scenarios that are prevalent in the industry, the CARF states that exchanges or bodies involved in the transaction of crypto-assets on behalf of customers should report the following information to the tax authorities.

Specifically, the CARF requires the exchanges or relevant bodies involved in the transaction of crypto-asset to reveal information such as the identity of their customers, trading activity, and transfers to personal wallets, to the tax authorities.

Subsequently, the CARF focuses on whom this new tax framework will be applicable and how it will be applicable, on what basis it could be applied. As such the CARF seeks to requisitely define terms and conditions.

Moreover, CARF seeks to define the crypto-asset. In particular, it defines as to which businesses or exchanges fall under the crypto-asset category. In addition, it explains the entities and individuals subject to data collection and reporting requirements. Also, it elaborates on transactions subject to reporting, as well as the information to be reported for such transactions.

Meanwhile, Roger Brown, a tax attorney who specializes in international tax, financial products, and digital assets took each part of the CARF and discussed the practical implications.