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The cryptocurrency industry is set to receive its own tax framework, introduced by the Organization for Economic Cooperation and Development (OECD).
The OECD, an international organization focused on establishing standards for various global issues, including taxation, has unveiled a new tax standard specifically for cryptocurrencies.
Amendments to the existing common reporting standard accompany this standard. While these standards are not obligatory, they serve as guidelines for regulators in both domestic and international policies.
The Crypto-Asset Reporting Framework (CARF) is designed to facilitate tax information exchange among countries, specifically focusing on cryptocurrencies. Its aim is to address potential tax evasion associated with these technologies.
Moreover, the updated rules also include modifications to the Common Reporting Standard (CRS), which was established in 2014 to promote tax transparency concerning financial accounts held abroad.
Mathias Cormann, the Secretary General of the OECD, tweeted on Thursday that the new international tax transparency standards aim to combat tax evasion in the modern digital and globalized economy.
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The two-part standard acknowledges the significant impact of the cryptocurrency industry and its implications for tax revenues in different nations. CARF comprises three main components: rules for collecting relevant tax information, including the scope of assets and transacting entities; establishing a new multilateral authority for enforcing these rules; and an electronic format (XML) for exchanging information among authorities.
The second part of the report introduces amendments to the CRS and includes a section dedicated to Central Bank Digital Currencies (CBDCs) and their potential tax compliance requirements. Additionally, it incorporates the term “Specified Electronic Money Product,” which encompasses digital representations of fiat currencies.
The OECD emphasizes crucial aspects that entities and individuals involved in cryptocurrency must consider to ensure proper monitoring and taxation. It correctly identifies elements such as wallets, exchanges, distributed ledger technology (DLT), and crypto asset-based derivatives.