Crypto assets that are capable of carrying, transferring, and churning out large amounts of finances in a digital state are being considered as taxable entities by several governments around the world. The Organisation for Economic Co-operation and Development (OECD) has drafted rules instructing global tax institutions on how to share crypto-related data among each other. The aim of this regulatory framework is to merge cryptocurrencies with the international tax reporting networks. A formal document has been published by the international policy-making organisation, outlining its proposals.
OECD has named this set of rules Crypto-Asset Reporting Framework (CARF). Changes to the existing Common Reporting Standard (CRS) have also been pitched by the OECD in a bid to accommodate the crypto assets as well. Supported by the G20 nations, the CSR requires financial institutions to identify customers' tax residency, report information about financial accounts of foreign tax residents to local tax authorities, and exchange the information on a global level.
“Unlike traditional financial products, crypto-assets can be transferred and held without the intervention of traditional financial intermediaries and without any central administrator having full visibility on either the transactions carried out, or crypto-asset holdings. Therefore, crypto-assets could be exploited to undermine existing international tax transparency initiatives, such as the CRS,” the OECD said in its statement.
The tax rules laid out by the Paris-headquartered institution will be valid for CBDCs and crypto assets that can be held and transferred in a decentralised manner, without the intervention of traditional financial intermediaries.
Individuals and entities which, as businesses, provide crypto exchange services will have to identify their customers, and then report the aggregate values of the exchanges and transfers for such customers on an annual basis, the CARF rules add.
The OECD is now seeking public comments on the proposals by April 29, 2022.
“A public consultation meeting will be held at the end of May on the basis of the which, the OECD plans to finalise the rules and commentary to the CARF and the amended CRS,” the financial body noted.
Governments in many countries are seeing crypto taxation as a way to regulate the digital assets space.
India, for instance, has levied a 30 percent tax on crypto-based incomes.
Australia is also planning to tax crypto assets as part of a broader revamp of its payment policies.