UK and International Tax news
OECD Launches Consultation On Crypto Assets
Friday 8th April 2022
The OECD has recently issued a public consultation document on a new global tax transparency framework for the reporting and exchange of information on crypto assets.
The purpose of the consultation is to inform policy makers decisions on the possible adoption of any such framework and its related design components.
In recent years, individuals have rapidly adopted the use of crypto assets for a range of investment and financial activities. Unlike traditional financial products however, crypto assets can be transferred and held without the intervention of traditional financial intermediaries. Central administrators do not have full visibility on the transactions carried out or crypto asset holdings. There is concern that crypto assets may be exploited and undermine existing international tax transparency initiatives, such as the Common Reporting Standard.
Given this, the G20 has asked the OECD to develop a framework for the automatic exchange of information on crypto assets. This new framework is to provide for the collection and exchange of tax relevant information between tax administrations, with respect to persons engaging in certain transactions in crypto assets. It will cover crypto assets that can be held and transferred in a decentralised manner, without the intervention of traditional financial intermediaries, as well as asset classes relying on similar technology that may emerge in the future.
Businesses that provide services to exchange crypto assets against other crypto assets, or for fiat currencies, must apply due diligence procedures to identify their customers, and report aggregate values of the exchanges and transfers for such customers on an annual basis.
Alongside the Crypto Asset Reporting Framework (CARF), the OECD has also developed proposals as part of the first comprehensive review of the CRS, with the aim of further improving its operation, based on the experience gained by governments and business over the past seven years since its adoption.
The proposal extends the scope of the CRS to cover electronic money products and Central Bank Digital Currencies. With the development of the CARF, the proposals include changes to cover indirect investments in crypto assets through Investment Entities and derivatives. The proposal also contains new provisions to ensure efficient interaction between the CRS and the CARF, in particular to limit instances of duplicate reporting. The amended CRS will seek to improve the due diligence procedures and reporting outcomes, with a view to increasing the usability of CRS information for tax administrations and, where possible, limiting burdens on financial institutions.
The OECD is seeking comments on the above proposals by 29 April 2022 to be followed by a public consultation meeting to be held at the end of May 2022. On the basis of the input received from the 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 with regard to the CARF and the amended CRS. It is 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.
For more information on the above, please contact Keith Rushen on 0207 486 2378.
Contact Us