An international exchange of tax-relevant information is also emerging for cryptocurrencies. This should make transactions more transparent and avoid tax evasion.
Transactions with cryptocurrencies still partially fly under the radar in tax law. The financial courts in Cologne and Baden-Württemberg already decided in 2021 that profits from the sale of cryptocurrencies are taxable. However, transactions with Bitcoin & Co are often hardly traceable for the tax authorities. 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 is likely to 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 exchange of information between around 100 countries, the financial authorities have been given a sharp tool in the fight against tax evasion. For tax offenders, often only voluntary disclosure remains to prevent a conviction for tax evasion, explains the economic law firm MTR Rechtsanwälte, which focuses part of its advice on tax law.
When it comes to profits from trading cryptocurrencies, things could get serious for the taxpayers: For the OECD published a new framework for tax transparency on October 10, 2022, which is also intended to enable an exchange of information regarding crypto-assets.
The Common Reporting Standard (CRS) has so far been very successful in the fight against international tax evasion. However, new players are emerging in the trade with cryptocurrencies, many of which are 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 from the CRS, the CARF should enable the automatic exchange of information with the states where the taxpayers reside. It is therefore to be expected that a significant part of crypto-exchanges will have to transmit their customers’ data to the responsible tax authorities.
Taxpayers who are unsure if they have disclosed all tax-relevant data should take action now. A voluntary disclosure that exempts from penalties for tax evasion might be considered, for example.
MTR Rechtsanwälte advises on tax law and the possibility of a voluntary disclosure that exempts from penalties.
