Canada to Implement International Crypto Tax Reporting Standard by 2026

Canada is taking proactive steps to implement the international Crypto-Asset Reporting Framework (CARF) for taxation by 2026, as outlined in a supplement to the 2024 annual budget. This move positions Canada ahead of the curve, as the CARF is expected to be adopted by 47 countries by 2027.

The CARF will introduce new reporting requirements for crypto asset service providers (CASPs) in Canada, including cryptocurrency exchanges, crypto-asset brokers, dealers, and automated teller machine operators. These entities, whether individuals or businesses, will be mandated to report transactions involving crypto assets and fiat currencies, as well as transactions between different crypto assets to the Canada Revenue Agency (CRA).

Specifically, CASPs will need to report any crypto asset transfers exceeding $50,000 USD, along with obtaining and reporting customer information such as name, address, date of birth, jurisdiction(s) of residence, and taxpayer identification numbers. Both Canadian residents and nonresidents engaging in crypto asset transactions will be subject to these reporting requirements.

Notably, central bank digital currencies and stablecoins will not fall under the CARF reporting obligations, as they are covered by amendments to the Organisation for Economic Cooperation and Development (OECD) Common Reporting Standard (CRS) for international tax information sharing.

The information collected under the CARF will also be shared internationally, similar to the CRS, as the framework was developed by the OECD. The motivation behind the creation of the CARF was to capture transactions that bypass traditional financial intermediaries, a gap identified in the CRS.

The OECD introduced the CARF at a meeting of G20 finance ministers and central bank governors in October 2022, with 47 countries committing to incorporating the framework into their domestic laws by 2027. With the OECD primarily composed of European members, the global adoption of the CARF signifies a significant step towards standardizing crypto asset taxation and reporting practices.

Overall, Canada’s early adoption of the CARF demonstrates the country’s commitment to staying ahead of the evolving regulatory landscape in the crypto industry. As the framework becomes more widely adopted globally, it is expected to enhance transparency and compliance in the crypto asset sector, ultimately contributing to a more robust and regulated market environment.