Poland has joined the Crypto-Asset Reporting Framework (CARF) joint statement, which obliges its signatories to adopt new crypto-asset transaction reporting standards. Poland sided with 58 states that plan to establish international exchange of tax information in this regard as of 2027.
Reasons and objectives of implementing CARF
CARF will guarantee automatic exchange of crypto-asset information between tax authorities aimed at combating tax avoidance and evasion, just as the common standard for exchange of information (CRS – Common Reporting Standard) provides for the exchange of information on financial accounts (the latter has been amended, among others, to adapt to CARF and eliminate double reporting under both of these standards). Simultaneously, CRS is composed of global framework for reporting and automatic exchange of information on financial accounts. Whereas CARF is aimed at reporting the use of crypto assets. Increasing interest in crypto assets and their use has given rise to concerns that tax authorities do not have sufficient information on similar transactions involving crypto assets, which can be employed for numerous investment and financial purposes. Unlike traditional financial products, crypto assets may be transferred and stored without the intervention of traditional financial intermediaries, such as banks, and excluding full insight into the conducted transactions or crypto assets held by any central administrator. New and non-regulated intermediaries and service providers, such as crypto exchanges and wallet vendors have also appeared on the crypto market.
CARF basics
The CARF model contains a multilateral agreement between competent authorities. This agreement provides for automatic exchange of information accumulated under CARF with jurisdiction or crypto-asset user residence, and is based on Art. 6 of the Convention on mutual administrative assistance in tax matters. As an alternative to CARF MCAA, states can also establish automatic exchange relationships under bilateral agreements between competent authorities based on double taxation treaties.
Reporting scope and obliged entities
CARF scope covers any digital representation of value based on the distributed ledger technology (crypto assets), such as blockchain. Reporting shall not apply to crypto assets that may not be employed for payments or investments (e.g., certain utility tokens exchangeable within a limited circle of entities for specific goods or services), as well as assets subject to CRS (e.g., cryptocurrencies that constitute financial instruments).
Any entity that offers services in the field of exchanging crypto assets into fiat currencies (e.g., PLN or EUR) and cryptocurrency trading shall be obliged to provide information under CARF. In practice, the new-standard reporting obligation will apply to crypto exchanges and exchange offices.
The reporting process will involve processing a number of data, including the tax identity number, country of residence, place of birth and cryptocurrency transaction details.
Implementation outcomes
The new reporting standard is supposed to provide tax authorities with tax-related information on crypto assets, submitted based on a unified standard, and thus, enable identifying non-declared or non-taxed transactions. Therefore, crypto users shall remember that the new reporting standard may also apply to their transactions. Entities obliged to report shall immediately take actions aimed at preparing for the fulfilment of their new duties.
