The Crypto-Asset Reporting Framework (CARF) is a standard developed by the Organisation for Economic Co-operation (OECD).
This latest tax transparency initiative is created against the backdrop of the rapid and increasing adoption of the use of crypto assets for a wide range of investment and financial uses. 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 market has also given rise to new intermediaries and service providers, such as crypto asset exchanges and wallet providers.
These developments mean that crypto assets and related transactions are not comprehensively covered by the OECD/G20 Common Reporting Standard (CRS), increasing the potential of their use for tax evasion while undermining the progress made in tax transparency through the adoption of the CRS.
The CARF seeks to ensure transparency of crypto asset transactions, through automatically exchanging such information with the jurisdictions of residence of taxpayers on an annual basis, in a standardised manner similar to the CRS.
The CARF will target any digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions. Carve outs are foreseen for assets that cannot be used for payment or investment purposes and for assets already fully covered by the CRS. Entities or individuals that provide services effectuating exchange transactions in crypto assets for, or on behalf of customers would be obliged to report under the CARF.
The intention is jurisdictions will work towards implementing the CARF in time for the first exchanges to take place in 2027 (of 2026 data), subject to legislative timeframes.
Collective engagement to implement the CARF
Guernsey, together with partner jurisdictions, issued a joint statement on 10 November 2023 to endorse the collective engagement to implement the CARF. The joint statement can be found in the news section of this website using the link below.
In June 2023 the OECD published the International Standards for Automatic Exchange of Information in Tax Matters, Crypto-Asset Reporting Framework and 2023 Update to the Common Reporting Standard.