Who is impacted by the Crypto-Asset Reporting Framework (CARF)?

The Crypto-Asset Reporting Framework (CARF) impacts both newly created and existing PayPal crypto accounts.

PayPal will document, review, and classify the customer to determine which accounts are held directly or indirectly by CARF Reportable Users. We’ll then report identified accounts and related crypto transactional data to the Luxembourg Inland Revenue (Administration des Contributions Directes, ACD), which may then share that information with other relevant tax authorities.

Note, there are varied classifications under CARF, which include:

Excluded Persons

• Financial Institutions
  - Depository Institutions - entities that accept deposits in the ordinary course of banking or a similar business, such as issuing credit and foreign exchange, credit facilitation, or that hold certain e-money products for customers.
  - Custodial Institution - entities that hold financial assets for the account of others as a substantial portion of their business. For example, securities and bonds.
  - Investment Entity - entities that conduct business investment activities or operations on behalf of a customer. For example, portfolio management, investing, or managing financial assets or certain crypto-assets, and commodity futures trading.
  - Specified Insurance Companies - insurance companies that issue or make payments with respect to cash value insurance contracts or annuity contracts.
• Non-Reporting Financial Institutions - financial institutions that fall under certain exempted categories. For example, governmental entities, international organisations, central banks, certain retirement funds, and other low-risk financial institutions defined by local law.
• Nonfinancial Entities - nonfinancial entities that fall into a variety of categories. For example:
  - Entities that are publicly traded on an established securities market (or a related entity thereof); and
  - Nonfinancial entities that are governmental entities, international organisations, or central banks (or wholly owned by any of these).

Potentially Reportable Persons

• Active Entities - nonfinancial entities that fall into a variety of categories. For example:
  - Entities for which less than 50 percent of their gross income for the preceding taxable year is passive income, and less than 50% of the weighted average percentage of assets held by them are assets that produce or are held for the production of passive income;
  - Tax-exempt non-profit entities that meet certain eligibility criteria;
  - Certain internal financing companies or treasury centers that only provide such services to other related entities within a nonfinancial group; and
  - Certain newly-organised or liquidating nonfinancial entities that did not recently and do not intend to operate the business of a financial institution.
• Other Entities - other nonfinancial entities that do not qualify under the Active Entity or any of the Excluded Person categories.
• Consumers and Individuals - PayPal is required to document new consumer and individual accounts to determine if they’re reportable under CARF. CARF was enacted into local law by Luxembourg Inland Revenue (Administration des Contributions Directes, ACD) to establish whether a person holding the crypto account is tax resident in any Reportable Jurisdiction. PayPal won’t allow the account holder to progress through the existing CARF onboarding application until all mandatory data elements have been filled out. During onboarding, consumer and individual account holders are required to indicate all countries where they are tax residents.