The Crypto-Asset Reporting Framework (CARF)
The CARF is a new global standard requiring the collection, reporting and exchange of tax information on the customers of crypto-asset service providers.
It has been developed by the Organisation for Economic Cooperation and Development (OECD) to prevent the use of virtual assets for tax evasion purposes.
It's intended to support the Common Reporting Standard (CRS) on automatic exchange of financial account information, which has applied to financial institutions in Jersey since 2016. The CRS is also being expanded to bring some digital assets within its scope for the first time.
Scope of the CARF
The CARF will apply to businesses, individuals and entities, which provide services effectuating exchange transactions in crypto-assets for or on behalf of customers. This includes crypto-asset exchanges and other intermediaries and service providers which provide exchange services, such as brokers and dealers in relevant crypto-assets.
Similarly to the CRS, businesses will have to collect information on the jurisdictions of tax residence and Taxpayer Information Numbers (TINs) of the users of relevant crypto-assets, and their beneficial owners. This information will be reported to Revenue Jersey on an annual basis, alongside details of relevant transactions undertaken on behalf of the user.
Reportable transactions are those involving:
- exchanges between crypto-assets and fiat currencies
- exchanges between one or more forms of crypto-assets
transfers of crypto-assets, including Reportable Retail Payment Transactions where an intermediary processes payments on behalf of a merchant accepting crypto-assets in payment for goods or services exceeding €50,000
Transactions will be reported on an aggregate basis by type of crypto-asset and by transfer type such as:
income derived from staking
In addition, details of the number of units and the total value of transfers of crypto-assets effected by a reporting entity on behalf of a crypto-asset user to wallets not associated with a virtual asset service provider or a financial institution will be required.
The relevant crypto-assets which give rise to reporting obligations are any digital representation of value which relies on a cryptographically secured distribution ledger or a similar technology to validate and secure transactions. This includes stable coins, derivatives issued in the form of a crypto-asset and certain non-fungible tokens (NFTs).
Certain categories of crypto-assets which are considered to pose limited tax compliance risks are excluded from reporting obligations, including crypto-assets which cannot be used for payment or investment purposes and those which are already covered by the CRS.
Central Bank Digital Currency and Specified Electronic Money Products are also excluded from the scope of the CARF, but they will fall within the scope of reporting under the expanded CRS when the new rules are introduced.
Changes to the CRS
At the same time as the introduction of the CARF, the OECD is amending the CRS to bring certain electronic money products and Central Bank Digital Currencies within its scope. Changes will also be made to ensure that indirect investments in crypto-assets through derivatives and investment vehicles are covered by the CRS.
As well as the changes which are intended to act as a package alongside the CARF, further changes are being introduced which are intended to improve the quality and usability of CRS reporting.
Collective engagement to implement the CARF and expansion of the CRS
On 10 November 2023, Jersey joined a group of 48 jurisdictions in expressing its intention to work towards a common implementation timeframe for the CARF, with the intention of first exchanges being made in 2027. In order to ensure consistency and a smooth implementation, the amendments to the CRS would also be made to the same timeframe.
Collective Engagement to implement the Crypto-Asset Reporting Framework
Timeframes for implementation
In line with the timeframes approved by the OECD earlier in 2023, the new rules are expected to have effect from 1 January 2026, with the first requirements to report and exchange information in 2027. This is also consistent with the EU's DAC8, finalised in October 2023.
Jersey intends to consult on the domestic implementation of the CARF and the expanded CRS in 2024 before introducing the necessary legislation.
Affected businesses should begin to consider what systems and processes they may need to put in place in advance of 1 January 2026 to allow them to collect the information required.
The OECD has published the model rules on the CARF and the expanded CRS, alongside commentaries to assist in their interpretation.
Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard on OECD
The xml scheme which will be used to report and exchange the information is being developed and is expected to be available in mid-2024.