LOCAL players earning from cryptocurrency-based games like the famous Axie Infinity must pay their income taxes, according to the Department of Finance (DOF).
Finance Undersecretary Antonette C. Tionko told reporters the DOF and the Bureau of Internal Revenue (BIR) have already looked into the company behind Axie Infinity, which they found is a non-resident foreign corporation that is also not registered in the Philippines. Vietnam-based Sky Mavis Pte. Ltd. developed Axie Infinity.
“That is one of the things that we hopefully capture once we have that system of registration for non-residents, those types of companies. It’s not in the Philippines, that company. But certainly whoever earns currency from it, it’s income; you should report it,” Tionko told reporters.
In the play-to-earn game Axie Infinity, players can earn cryptocurrency token “Smooth Love Potion,” which can be sold in exchange for cash. In its website, it said the game has attracted many players from developing countries as it provides a new income stream during the Covid-19 pandemic.
While Tionko admitted that the Securities and Exchange Commission and the Bangko Sentral ng Pilipinas have yet to look deeper into the characterization of the cryptocurrency on whether it is a security or a currency, Tionko clarified that it is taxable.
“Cryptocurrency is an asset, so it’s already taxable in the Philippines. Now, what kind of tax applies? Well, certainly, the gains are subject to income tax,” she said.
Apart from income tax, BIR Deputy Commissioner Arnel SD. Guballa told the BusinessMirror that earnings from cryptocurrency-based games are also subject to value-added tax (VAT).
Under Republic Act 10963, or the Tax Reform for Acceleration and Inclusion (Train) law, those with annual taxable income that does not exceed P250,000 are exempted from paying personal income tax.
Moreover, the Train law also provided that gross annual sales and/or receipts earned from the sale or lease of goods or properties or the performance of services not exceeding P3 million are also exempted from VAT.
However, Guballa said he personally believes that the P250,000 threshold on imposing income taxes on gaming revenues should be removed. However, he admitted this move requires passing a law.
“I believe that [threshold] should be reviewed,” Guballa told the BusinessMirror. “Gaming revenues should be taxable without threshold.”
He also said the bureau will also be studying whether the taxes will be imposed upon earning the cryptocurrency token or upon exchanging it to cash.