Amendments to the Common Reporting Standard and the Crypto-Asset Reporting Framework (CARF)

17/01/2023 Stuart Dalmedo, Louise Anne Turnock

The Common Reporting Standard (CRS) was designed to promote tax transparency in relation to financial accounts held abroad. The CRS requires banks and other financial institutions to report on assets that they hold for clients who are resident outside of that country. The information is then reported to clients’ tax residence authority, which in turn exchanges that information with the other participating jurisdictions. The CRS was initially adopted in 2014, which has since seen over one hundred jurisdictions join the CRS.

Recently, the OECD together with the G20 countries have conducted its first comprehensive review of the CRS in consultation with participating jurisdictions, financial institutions and stakeholders. This has brought about a number of changes that were approved by the OECD Committee on Fiscal Affairs in August 2022, namely, a new tax transparency framework which now provides for the automatic exchange of tax information on crypto-asset transactions in a standardised manner and a number of amendments to the CRS, which were published by the OECD on 10th October 2022.

The current CRS framework focuses on traditional financial assets and currencies. Crypto assets, in most cases, do not fall within the scope of the current CRS framework. Crypto-Assets can be transferred, stored or traded electronically, using a peer-to-peer system, without any financial intermediaries and without any central administrator having full visibility on either the transactions carried out, or the location of the crypto-asset holdings. Due to the nature of crypto-assets, the developments within the crypto-asset space have reduced tax administrations’ visibility on tax-relevant activities carried out within the sector, increasing the difficulty of verifying whether associated tax liabilities are appropriately reported and assessed, which poses a significant risk on recent gains in global tax transparency, which will be gradually eroded.
To address this gap in international tax reporting standards within the crypto-asset space and the significant risk that this poses on global tax transparency, the OECD together with the G20 have developed the Crypto-Asset Reporting Framework (CARF).

The term “Crypto-Asset” is defined by 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.” The definition includes a reference to “similar technology” to ensure it can include new technological developments that emerge in the future and that operate in a functionality similar to crypto assets. The definition of crypto assets thereby targets those assets that can be held and transferred in a decentralised manner, without the intervention of traditional financial intermediates, including stablecoins, derivatives issued in the form of a crypto asset and certain non-fungible tokens.

The CARF provides for the automatic exchange of tax relevant information on transactions in crypto-assets in a standardised manner with the participating jurisdictions of taxpayers on a yearly basis and builds on the global Financial Action Task Force (FATF) rules developed to prevent money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. It is expected that the scope of crypto-assets covered under the CARF will be consistent with the crypto-assets covered by the FATF recommendations.

The CARF consists of rules and commentary which can be transposed into domestic law to provide for the reporting of information for crypto-asset service providers with a relevant nexus to the jurisdiction implementing the CARF. The CARF has been designed with four key building blocks in mind;
(i) the scope of crypto-assets to be covered;
(ii) the entities and individuals subject to data collection and reporting requirements;
(iii) the transactions subject to reporting, as well as the information to be reported in this respect; and
(iv) the due diligence processes to identify crypto-asset users and controlling persons to determine the relevant tax jurisdictions for reporting and exchange purposes.
Although the proposed CARF is significantly based on the CRS model, it does not impose a requirement to report on the assets held, but on certain transactions only. There are three concrete transactions which are subject to reporting under the CARF:
(i) exchanges between relevant crypto-assets and fiat currencies;
(ii) exchanges between one or more forms of relevant crypto-assets; and
(iii) transfers (including retail payment transactions) of relevant crypto-assets.
Gibraltar forms part of the CRS network, and was placed on the OECD White List of territories that have substantially implemented the internationally agreed standard on tax information exchange. Gibraltar was one of the first jurisdictions to adopt the OECD Common Reporting Standards, which was enacted on 22 December 2016. The reporting regime was introduced into Gibraltar in 2017 as part of Article 13 of the OECD Base Erosion and Profit Shifting Action Plan. As a tax compliant jurisdiction subject to the CRS and a leading jurisdiction within the crypto space, Gibraltar will be subject to the proposed amendments to the CRS and the CARF, which will be of particular relevance for operators within the DLT and financial services space.

Gibraltar, as a leading jurisdiction in the DLT space, is consistently on top of the latest developments in the DLT sector and has a progressive attitude towards improving and encouraging ‘right touch’ regulation. Gibraltar’s DLT regulatory framework focuses on protecting customers and is fully aligned with CARF’s expectations. Gibraltar’s purpose built DLT framework has been in effect since 2018 and was one of the first pieces of legislation of its kind globally. It was designed to provide a safe and structured framework and represents Gibraltar’s advancements towards becoming a world-leading cryptocurrency hub. Consequently, Gibraltar will need to be closely connected to the CARF developments and ensure the timely adoption of the CARF. It is important to note that the CARF is in fact a separate and complementary framework to the CRS, which might see some entities reporting under both the CRS and the CARF. In developing the CARF, the OECD together with the G20 countries have sought to reduce the tax reporting burdens by minimising the number of reportable transactions captured by the CARF. This is evident in the definition provided for “Relevant Crypto-Assets” in the CARF, which does not capture specified Electronic Money Products and Central Bank Digital Currencies, due to the fact that there is already an obligation to report on these assets under the CRS.
At present, the CARF is not in force but there is ongoing work on the implementation package, which will provide for a seamless and consistent domestic and international approach. The implementation package will introduce a framework of bilateral or multilateral competent authority agreements or arrangements for the automatic exchange of information collected under the CARF, in addition to IT-solutions providing for the support of exchange of information as well as developing the appropriate mechanisms to automatically exchange information pursuant to the CRS amendments. The OECD expects to implement a co-ordinated timeline approach for both the CARF and the amendments to the CRS.

Legal disclaimer

Please note that the information and any commentary on the law or otherwise contained in this article is only intended as a general statement and is provided for information purposes and not for the purposes of providing legal advice. No action should be taken in reliance on it without specific legal advice. Every reasonable effort is made to make the information and commentary accurate and up to date, but no responsibility for its accuracy and correctness, or for any consequence of relying on it, is assumed by the author and/or ISOLAS LLP.

For further information on this article, contact Partner Stuart Dalmedo at

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