The Hong Kong region has officially launched a public consultation to seek opinions on how to implement the International Crypto Asset Reporting Framework (CARF), a move aimed at ensuring that cryptocurrency tax data sharing complies with global standards.
According to a press release issued on Tuesday, Hong Kong is soliciting feedback on the implementation of CARF and the modification of tax reporting standards. The announcement clearly states that this initiative is closely related to the Hong Kong Special Administrative Region government's efforts to combat cross-border tax evasion.
It is important to emphasize that this initiative represents a standardization process rather than a shift in government direction. As stated in the announcement, since 2018, the authorities in the Hong Kong region have begun annual financial account information exchanges with cooperating jurisdictions.
The Secretary for Financial Services and the Treasury, Christopher Hui, pointed out that adopting CARF will fully demonstrate the government's "firm commitment to promoting international tax cooperation and combating cross-border tax evasion."
In addition to joining CARF, the Hong Kong region is also seeking opinions on adopting the Common Reporting Standard (CRS). Similar to CARF, CRS is also an initiative launched by the Organisation for Economic Co-operation and Development (OECD) aimed at standardizing various aspects of tax reporting internationally.
CARF has gained significant attention among global regulators. At the beginning of November, it was reported that 47 national governments had issued a joint statement committing to swiftly adopt the framework. Reports indicate that Brazil is also considering joining this data exchange program.
However, some countries appear to be making slower progress. At the end of November, Switzerland announced that it would postpone the implementation of CARF until 2027 and is still evaluating which countries it will share data with. At the same time, the United States is reviewing a proposal from the Internal Revenue Service (IRS) regarding joining the CARF program.
Nevertheless, the global adoption of this data-sharing program is steadily increasing. The official list maintained and updated by the OECD on December 4 shows that 48 countries have committed to adopting CARF by 2027, 27 countries have committed to adopting it by 2028, and the United States has committed to completing its adoption by 2029.
This means that 76 countries have now committed to sharing cryptocurrency data. Another statistic from the OECD shows that 53 countries have signed a multilateral competent authority agreement, which serves as the legal basis for automatic data exchange.
Recent statistics indicate that the registration of foundation companies in the Cayman Islands has increased by 70% year-on-year. Legal experts from Walkers law firm suggest that CARF may not apply to institutional structures that only hold crypto assets, such as protocol vaults, investment funds, or passive foundations, making Cayman Islands foundations a potential option for regulatory evasion.
Related: Circle launches privacy-focused stablecoin project USDCx
Original article: “Hong Kong Launches CARF Cryptocurrency Tax Consultation to Combat Tax Evasion”
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