An international exchange of tax-relevant information is also emerging for cryptocurrencies. This will make transactions more transparent and avoid tax evasion.
Transactions with cryptocurrencies are still partially flying under the radar in tax law. The tax courts of Cologne and Baden-Württemberg already decided in 2021 that profits from the sale of cryptocurrencies are taxable. However, transactions with Bitcoin & Co are often difficult for tax authorities to trace. This could soon change. According to plans by the Organisation for Economic Co-operation and Development (OECD), there could soon be a kind of automatic exchange of tax-relevant data for transactions with cryptocurrencies.
The procedure might resemble the law on the automatic exchange of information about financial accounts in tax matters, which has been applied in tax law for several years. With this automatic information exchange between around 100 states, tax authorities have been given a sharp tool in the fight against tax evasion. For tax evaders, often the only option is voluntary disclosure to avoid a conviction for tax evasion, explains the economic law firm MTR Legal, which has a focus on tax law consultancy.
Even with profits from trading cryptocurrencies, things could get serious for tax subjects: Because the OECD published a new tax transparency framework on October 10, 2022, which is also supposed to enable an information exchange in relation to crypto-assets.
The Common Reporting Standard (CRS) has so far been very successful in the fight against international tax evasion. However, new actors are emerging in the trade with cryptocurrencies, many of whom are currently still unregulated, so crypto-transactions are not comprehensively registered by the CRS. This gap is to be closed by the new Crypto-Asset Reporting Framework (CARF). As already known through the CRS, the CARF is supposed to enable the automatic exchange of information with the countries where taxpayers reside. It is therefore expected that a large part of crypto exchanges will have to transmit data about their customers to the relevant tax authorities.
Taxpayers who are unsure whether they have disclosed all tax-relevant data should act now. Consideration can be given, for example, to a self-disclosure to avoid punishment for tax evasion.
MTR Legal advises on tax law and the possibility of a punitive self-disclosure.
