MANILA, Philippines — Players of the popular online game Axie Infinity who sell “pets” and earn real-world money must pay income taxes owed to these transactions, the finance ministry said ( DOF).
“Whoever makes money out of it is income that you have to declare,” Deputy Finance Secretary Antonette Tionko told reporters last week.
Amid the extended COVID-19 quarantine, CNBC reported in May that thousands of Filipinos had become addicted to up-and-coming games like Axie Infinity, where players earn cryptocurrency and non-fungible tokens (NTFs). by cultivating fantastic creatures called “axies”.
While players cannot yet monetize the NTFs they earn in the game itself, the online pet ax trading generates thousands of pesos when sold.
Whether axies are paid in cash or in kind, Tionko said these transactions are taxable.
Tionko said that even the cryptocurrency earned in Axie Infinity is taxable, although the government has yet to put in place a mechanism to determine the amount and actually collect tax on these digital assets.
“Cryptocurrency is an asset, so it’s already taxable in the Philippines. What type of tax applies? Certainly the earnings are subject to income tax, ”Tionko said.
“But if you look at the details, a lot of it will depend on its characterization, which I think is something for the SEC. [Securities and Exchange Commission] and the BSP [Bangko Sentral ng Pilipinas] decide, ”she said.
“Is it a security? Is it a currency? So it is these elements that will help us set the rules for how it should be taxed. But however it is characterized, it is taxable – subject to income tax, ”Tionko added.
But Tionko said the purchase of tokens to play the game is not taxable.
“Remember the principle of taxation: it is a flow of wealth. Buying is therefore not a flow of wealth. Maybe it’s taxable for them if you buy it at a discount, but that gets into the nitty-gritty, ”she said.
For Sky Mavis, the Vietnamese game developer behind Axie Infinity, its revenue from the game cannot yet be captured by the Philippine tax authorities.
Citing a report from the Bureau of Internal Revenue (BIR), Tionko said Sky Mavis is a non-resident foreign company that is not registered in the Philippines.
“This is one of the things that we hope to grab once we have this registration system for non-residents, these types of businesses that are not in the Philippines,” Tionko said.
Pending in Congress, bills to levy a 12% value added tax (VAT) on digital goods and services, especially transactions through global online platforms.
Documents on the 2022 billion peso national budget proposal for 2022 showed that more than a third of the 3.29 billion pesos in tax and non-tax revenue the government has scheduled to collect next year would come from the ‘income tax.
Of the 3.13 trillion pesos in tax revenue targeted for collection in 2022, taxes on net income and profits would amount to 1.25 trillion pesos, while VAT is expected to contribute 443.98 billion. pesos.
The BIR was tasked with collecting 2.43 trillion pesos in taxes next year, up from this year’s target of 2.08 trillion pesos.
The BOC’s 2022 target, meanwhile, was 671.66 billion pesos, up from its 2021 program of 616.75 billion pesos.
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