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October 14, 2022
2022-5981

Report on recent US international tax developments – 14 October 2022

The Organisation for Economic Co-operation and Development (OECD) on 10 October released to G20 Finance Ministers and Central Bank Governors a new global tax transparency framework for crypto-assets and amendments to the Common Reporting Standard (CRS). The Finance Ministers and Central Bank Governors were meeting in Washington, DC on 12-13 October. The Crypto-Asset Reporting Framework (CARF) initiative is the result of the rapid adoption of the use of crypto-assets for a wide range of investment and financial uses. According to an OECD press release, “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 CARF is meant to provide transparency in regard to crypto-asset transactions through automatic exchange of information “with the jurisdictions of residence of taxpayers on an annual basis, in a standardised manner similar to the CRS.” The amendments to the CRS are meant to modernize its scope to fully cover digital financial products and also improve its operation.

The OECD on 22 March 2022 initiated a public consultation titled “Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard.” The OECD also proposed amendments to the CRS to bring crypto-assets into scope. At the time, the OECD announced plans to launch a comprehensive review of the CRS to improve its operation.

In a recent announcement in regard to the Foreign Account Tax Compliance Act (FATCA), the Internal Revenue Service (IRS) indicated that it has identified “Sponsoring Entities that do not appear to have Sponsored Entities registered in the FATCA Registration System.” A Sponsored Entity is a Sponsored Foreign Financial Institution (FFI) or a Sponsored Direct Reporting Non-Financial Foreign Entity (NFFE). Sponsoring entities perform the “the due diligence, withholding, and reporting obligations of one or more Sponsored FFIs, or the due diligence and reporting obligations of one or more Sponsored Direct Reporting NFFEs.”

According to the IRS, it will begin requesting Sponsoring Entities to cancel their FATCA agreement if they fail to meet the requirements to be a Sponsoring Entity of Sponsored FFIs and/or Sponsored Direct Reporting NFFEs.

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For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC

 
 

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