1. In order to exchange information under the Crypto-Asset Reporting Framework (CARF), Jurisdictions must have a legal framework in place that allows for the automatic exchange of information with partner Jurisdictions. This legal framework should include both a legal basis for the information exchanges, as well as administrative agreements to determine the scope, timing and method of the information exchanges.
2. Jurisdictions can have a legal basis for tax information exchanges pursuant to the Convention on Mutual Administrative Assistance in Tax Matters (Convention). Pursuant to Article 6 of the Convention, two or more Parties to the Convention can mutually agree to automatically exchange predefined foreseeably relevant information in accordance with the procedures determined by the Parties by mutual agreement. In the context of the Common Reporting Standard, this multilateral approach has proven to be an efficient route to put in place widespread networks of exchange relationships as it allows Jurisdictions to efficiently activate bilateral exchange relationships.
3. To operationalise Article 6 of the Convention, Jurisdictions must also have in place administrative agreements to determine, in particular, the information to be automatically exchanged and the time and method of the exchanges. For the CARF, this Multilateral Competent Authority Agreement (CARF MCAA), which is based on Article 6 of the Convention, sets out the detailed modalities of the exchanges taking place every year on an automatic basis.
4. The CARF MCAA consists of:
a declaration to be signed by the Competent Authority of the Jurisdiction or its designated representative to become a signatory of the CARF MCAA;
a preamble which explains the purpose of the CARF MCAA and contains representations on domestic reporting and due diligence rules that underpin the exchange of information pursuant to the CARF MCAA. It also contains representations on confidentiality, data protection safeguards and the existence of the necessary infrastructure;
eight sections containing the agreed provisions of the CARF MCAA: Section 1 deals with definitions, Section 2 covers the items of information to be exchanged, Section 3 the time and manner of the exchange, Section 4 collaboration on compliance and enforcement and Section 5 the confidentiality and data safeguards that must be respected. Consultations between the Competent Authorities, amendments to the CARF MCAA and the general terms of the CARF MCAA, including the activation of exchange relationships through the submission of notifications, the suspension, deactivation and termination, as well as the role of the Co-ordinating Body Secretariat are dealt with in Sections 6, 7 and 8.
seven notifications required under Section 7(1) for the CARF MCAA to enter into effect for a Competent Authority.
5. The CARF MCAA is a multilateral agreement based on the principle that automatic exchange is reciprocal and that the exchange will be done on a bilateral basis. There may be instances where Competent Authorities wish to enter into a non-reciprocal bilateral exchange relationship (e.g. where one Jurisdiction does not have an income tax), as confirmed in a notification provided pursuant to Section 7(1)(b).
6. As an alternative to the CARF MCAA, Jurisdictions can also establish automatic exchange relationships through bilateral competent authority agreements based on bilateral double tax treaties or tax information exchange agreements that permit the automatic exchange of information, or the Convention on Mutual Administrative Assistance in Tax Matters. Jurisdictions could also enter into a self-standing intergovernmental agreement or rely on regional legislation covering both the reporting obligations and due diligence procedures coupled with the exchange of information modalities.