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Crypto Reporting Framework discussed at G20 and a Decision is made on Rapid Implementation

The G-20 leaders voted on Saturday on the speedy implementation of the framework for reporting on digital assets in a statement that a significant majority of the member countries would like information exchange about non-financial assets in 2027.

The Crypto Asset Reporting Framework (CARF) or template is being designed to ensure that these financial assets aren’t employed by tax evaders to hide their wealth that is not accounted for.

“We want to see the rapid adoption of the CryptoAsset Reporting Framework (“CARF”) as well as amendments for the CRS. We call on to the Forum for Transparency and Exchange Tax-related Information to establish a suitable and coordinated timeframe to begin exchanges with relevant jurisdictions,” declared the G20 Leaders declaration that was approved by the majority of G20 members.

The heads of 20 developed and developed countries have reiterated the desire to continue cooperating to create an efficient, sustainable, and modern tax system that meets the requirements of the new century.

“We remain determined to speedily implement the two-pillar tax package. A significant amount of progress has been made in the area of Pillar One including the delivery of a draft text for a Multilateral Convention (MLC), and the work on Amount B (framework to facilitate the simplified and efficient application of the arm’s-length principle to baseline distribution and marketing activities) and the conclusion of work to develop the Subject to Tax Rule (STTR) in Pillar Two,” the declaration stated.

In a press conference following the summit, Finance Minister Nirmala Sitharaman stated that the G20 nations have made significant advancements on the two-pillar solution.

“Work is underway on the exchange of information regarding non-movable property transactions between nations. There’s a new beginning of the pilot program for the South Asia Academy for tax and financial crime investigations together and the OECD,” Sitharaman said.

In the framework of the global tax agreement around 140 nations including India are committing to change the tax rules across the globe to make sure that multinational companies pay taxes everywhere they do business as well as at an ad hoc 15. However, a few thorny issues have to be ironed out prior to the implementation.

The G20 nations urged the OECD to come up with an inclusive framework to quickly solve the a few issues concerning the MLC (multilateral convention) with the aim of making the MLC for signing during the second half of 2023. Then, they will complete Amount B by the end of 2023. Amount B before this time in 2023.

“We applaud the efforts made by a variety of nations to take the Global Anti-Base Erosion (GloBE) Rules as a unified approach. We recognize the necessity to coordinate efforts in strengthening capacity to implement the two-pillar tax system effectively. We particularly, we welcome the plan to provide additional technical and support for countries in need,” the declaration said.

In addition, the G20 countries also considered the OECD report on ‘Enhancing international Tax Transparency in Real Estate’ and Global Forum report on Facilitating the Use of Tax Treaty-Exchanged information for non-tax purposes’.

The OECD has recommended the automatic exchange of data on real estate assets between nations and the establishment of ownership records that are digitally available to the designated relevant authorities on a continuous basis, amid concerns about the possibility of foreign real estate investments being utilized to “shelter unaccounted for assets”.

The report pointed out that there was an rise in foreign-owned real estate assets in the last decade and that a significant amount of money has been moved from financial assets into buying real estate assets in foreign countries.

The Global Forum report also called for countries to adopt a ‘whole-of-government’ approach to address the challenge of illicit financial flows through the sharing of information from tax authorities to non-tax agencies, like financial intelligence units, anti-corruption agencies, customs authorities and public prosecutors.

India was pushing for the expansion of the scope of the common reporting standards (CRS) during the G20 to include non-financial assets, such as real estate property, as part of an automatic exchange of data (AEOI) within OECD countries.

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