### CARF: Global Crypto Tax Reporting Framework Set to Impact Chinese Investors

The Organisation for Economic Co-operation and Development's (OECD) Crypto-Asset Reporting Framework (CARF) is poised to significantly alter the tax landscape for cryptocurrency investors globally, drawing parallels to the Common Reporting Standard (CRS) for traditional financial assets. CARF aims to enhance crypto tax regulation through cross-border information exchange, with 54 countries already having signed on, including jurisdictions like the Cayman Islands and the United Kingdom.

Hong Kong is slated to enact legislation for CARF by 2026, with data collection commencing in 2027 and information exchange beginning in 2028. While mainland China has not yet signed the framework, a tax vacuum currently exists. However, it is important to note that cryptocurrency gains remain taxable in China. Converting digital assets to fiat currency or engaging in cross-border fund transfers may trigger retroactive tax collection. High-net-worth individuals are advised to proactively plan their tax strategies.

Following CARF's implementation, there is a theoretical possibility of tracing historical asset data. However, data collected prior to a country's signing of the framework is typically not subject to exchange. The actual effectiveness of retroactive tax collection will depend on the strength of information chains and the enforcement capabilities of tax authorities.

For Hong Kong residents, the tax burden is generally lower, with no capital gains tax on cryptocurrencies, meaning crypto transactions usually do not incur additional taxes. However, individuals must remain mindful of salary tax regulations and rules pertaining to foreign trade settlements.

It is recommended that investors engage in reasonable and compliant tax planning. Long-term holdings of unrealized gains are typically not subject to taxation. CARF's primary focus will be on monitoring the flow of crypto to fiat currencies and on-chain transactions.