CARF/DAC8

In response to the rapid growth of the Crypto-Asset market, the G20 mandated the OECD in April 2021 to create a framework for the automatic exchange of tax-related data on Crypto-Assets.   

The Crypto-Asset Reporting Framework (CARF) was approved by the OECD in August 2022. It standardizes reporting of tax information on Crypto-Asset transactions for automatic exchange. The CARF defines relevant Crypto-Assets, specifies reporting obligations for intermediaries and service providers, and aligns with global anti-money laundering standards.   

What is CARF & DAC8? 

CARF is a global initiative led by the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes.  

Its primary objective is to facilitate the automatic exchange of information between countries, specifically addressing emerging tax evasion risks related to cryptocurrency and digital assets. CARF ensures the collection and automatic exchange of information on transactions involving relevant crypto-assets, enhancing tax transparency and compliance on a global scale.  

DAC8 serves as the European counterpart to CARF (from OECD). The reporting framework is established by amending the Directive on Administrative Cooperation (DAC), which facilitates data exchanges between tax authorities. DAC8 is a significant legislative initiative by the European Commission. Its mission is to enhance tax transparency in the rapidly evolving world of crypto-assets.  

DAC8 aims to track transactions made by EU clients involving crypto-assets, thereby reducing the risk of tax fraud and evasion. It covers both domestic and cross-border transactions and may also include non-fungible tokens (NFTs) in some cases.  

What is reportable under CARF / DAC8?  

Crypto-assets that can be held and transferred in a decentralized manner without the intervention of traditional financial intermediaries.  

• Asset classes relying on similar technology that may emerge in the future.  
• Relevant types of transactions  
• Exchanges between crypto-assets and fiat currencies   
• Exchanges between crypto-assets   
• Transfers of crypto-assets   

Who is impacted by CARF or DAC8?  

CARF significantly impacts various entities within the global financial landscape, including: 

• Crypto-Asset Service Providers: Exchanges and wallet providers dealing with crypto-assets are subject to CARF regulations. These intermediaries play a crucial role in reporting and data collection.  
• Some entities of banks and other financial institutions may also be impacted.  

Entities that, as a business, provide services to exchange crypto-assets against other crypto-assets, or for fiat currencies, must apply the due diligence procedures to identify their customers, and then report the aggregate values of the exchanges and transfers for such customers on an annual basis. 

When are CARF and DAC8 starting? 

CARF - While an official starting date is yet to be announced, countries have committed to implementing the framework by 2027 as per a Joint Statement. The initial reporting is anticipated to commence in 2027. 

DAC8 - DAC8 directive has been fully adopted. All EU Member States must now implement the legislation into their national law by 31 December 2025 at the latest.  

Crypto-assets service providers should comply with the reporting obligations in relation to crypto-assets as introduced by DAC8 from 1 January 2026. The first calendar year during which DAC8 will apply is 2026. By 31 January 2027 at the latest, the reporting obligations covering 2026 must be fulfilled in the relevant EU Member State. For certain parts of DAC8, a different timetable will apply. The provisions on identification service, an electronic process for ascertaining identity and tax residence, will apply from January 2025. 

And CRS 2? 

In line with the Common Reporting Standard (CRS), the due diligence procedures require the identification of both individual and Entity customers, as well as their Controlling Persons. The CRS has been amended to include certain electronic money products and Central Bank Digital Currencies. Indirect investments in Crypto-Assets via derivatives and investment vehicles are now covered by the CRS. Additional changes strengthen reporting requirements and provide a carve-out for genuine non-profit organizations. It includes also the expansion of the reporting requirements in respect of Account Holders, Controlling Persons and the Financial Accounts they own. The industry is used to refer to the changes in CRS under the name “CRS 2”.

We are working closely with big4 firms to remain at the forefront of regulatory updates and proactively prepare for the integration of new regulations and enhancements into our Tax solution.