“Today’s announcement of co‑ordinated international action on cryptoassets is a major step forward, marking another important milestone towards the widespread and co-ordinated approach to combat tax evasion through greater transparency and exchange of information,” Secretary-General Cormann said.

“We strongly welcome the extensive support being shown for quick action to make the international exchange of information collected under the OECD standard on cryptoasset reporting a reality. The international community can count on the OECD and the Global Forum on Transparency and Exchange of Information for Tax Purposes to ensure that the tax transparency architecture remains both up-to-date and effective going forward.”

The Crypto-Asset Reporting Framework (CARF) is a key component of the International Standards for Automatic Exchange of Information in Tax Matters developed by the OECD under a G20 mandate. It provides for the automatic exchange of tax-relevant information on cryptoassets and comes against the backdrop of a rapid adoption of the use of cryptoassets for a wide range of investment and financial uses.

The guide is organised into two parts. Part A discusses the tax treatment for digital tokens, and Part B explains the tax treatment for initial coin offerings. The tax treatment set out in the guide is based on the application of existing income tax provisions. Where a tax treaty is applicable, existing treaty rules will apply, IRAS said.

The general tax treatment for transactions involving the use of payment tokens, utility tokens and security tokens are as follows:

• Payment token: this regarded as an intangible property. Consequently, transactions involving the use of payment tokens as payment for goods or services are viewed as barter trade and the value of goods or services transferred should be determined at the point of transaction.
• Utility token: the use of a utility token to exchange for goods or services is unlikely to create an income subject to tax on the user at the point of exchange. It may, on the other hand, give rise to a deductible expense subject to usual deduction rules.
• Security token: the taxability of the return derived from a security token depends on the nature of the return, for example, whether it is in the form of interest or dividend, etc.

With regards to ICOs, the taxability of the ICO proceeds depends on the rights and functions of the tokens issued to the investors. The proceeds from the issuance of payment tokens may be taxable depending on its specific facts and circumstances; while proceeds from the issuance of utility tokens will generally be regarded as deferred revenue. Proceeds from the issuance of security tokens is akin to proceeds from the issuance of a debt or equity which is capital in nature and thus not taxable.