Canada’s Crypto Tax Revolution: CARF Implementation Explained

By 2026 Canada will be leading the world in the regulation of crypto tax using the International Crypto-Asset Reporting Framework (CARF). This will place heavy reporting obligations on crypto asset service providers.

Canada’s Roadmap to CARF Implementation

If everything goes as planned, Canada is going to be the first country to operationalize CARF, or International Crypto-Asset Reporting Framework. The updated national budget for 2024 indicates that Canada is going to implement the CARF standards by 2026.

Canada has chosen to get ahead of the game by bringing forward the date of implementation by a year, although the legislative deadline is set for 2027. The government has earmarked a huge sum of money for the support of these programs. From 2024–25, they will be granted $51.6 million for five years. Following that, the CRA will get an additional $7.3 million annually to support CARF enforcement oversight.

Insights from G20 Meeting

This development will make Canada one of the more and more countries aiming to regulate the taxation of cryptocurrencies. In October 2022, the G20 finance ministers and central bank governors met to discuss the framework that was first suggested by the OECD. Uniform crypto taxes are supported worldwide, as 47 nations have made a commitment to include CARF in their own laws by 2027.

Breaking Down CARF’s Reporting Obligations: What CASPs Should Expect

CARF will tighten the reporting obligations for crypto asset service providers (CASPs) that include cryptocurrency exchanges, brokers, dealers, and ATM operators. Reporting requirements are applicable to stablecoins, non-fungible tokens, and crypto-asset derivatives.

Canadian CASPs must also report transactions to the CRA. This involves all the exchange transactions, including crypto-to-fiat and crypto-to-crypto transactions, with a value of over $50,000 USD.

CASPs must gather customer personal information and taxpayer identification numbers.

Concerns Within The Cryptocurrency Ecosystem

Canadian bitcoin sales are affected by the anticipated rise in the capital gains tax inclusion rate from 50% to 66% for those earning over $250,000. This raises concerns about investment and innovation.

CARF reporting will not apply to central bank digital currencies or digital representations of fiat currencies like stablecoins. Instead, OECD Common Reporting Standard changes will apply.

Information collected under CARF is shared internationally like CRS, facilitating cross-border tax enforcement and compliance. Privacy activists are worried about these new information-sharing mechanisms.

This page is for information only. It does not provide legal, tax, investment, financial, or other advice.