Yes, Even Your Earnings from Axie Infinity Are Taxable
Earnings from the booming blockchain-enabled Axie Infinity should be declared as part of your income tax, a Department of Finance representative reminded gamers and entrepreneurs who have caught onto this new craze.
Speaking to reporters last week, DOF representative Antoinette C. Tionko said, “[I]t’s income you should report.”
A play-to-earn game, Axie Infinity exploded in popularity during the pandemic as Filipinos used the game as a way to earn extra income amid the economic stresses of the lockdown. By battling it out with digital creatures called Axies, players can earn an in-game token called a Small Love Potion, or SLPs, which are worth a certain amount of cryptocurrency, that can then be converted into pesos.
Plus, players can also purchase and trade Axies themselves. You need three of them to join the game in the first place, and their prices have skyrocketed as the game grew in popularity.
The current expense of buying Axies has enabled a new class of entrepreneurs to hire players as “scholars”, who are loaned Axies purchased by an investor or manager.
One such investor, Alfonso Valmores of Cosmic University, told SPIN Life last month said that the capital that he and the partner have poured into Axie Infinity has already reached P3 million.
“Cryptocurrency is an asset, so it’s already taxable in the Philippines. What kind of tax applies? Certainly, the gains are subject to income tax,” said Tionko, as quoted in a report by Inquirer’s Ben O. De Vera.
Tionko confessed that both the Securities and Exchange Commission and the Bangko Sentral ng Pilipinas have yet to determine if Axies can be “characterized” as assets or securities.
“But regardless of how it is characterized, it’s taxable, subject to income tax,” she continued.
An Investor Reacts to Axie Infinity Tax Statements
Valmores’ organization, Cosmic University, got its start in Axie Infinity. At present, it is also expanding into other opportunities in the esports and gaming space, such as fielding a Wild Rift pro team and educating future play-to-earn investors.
Speaking with SPIN Life about Tionko’s statements, Valmores said, “I’d want to know how they would track the crypto, especially yung specialty ni crypto, anonymous ka from everyone.”
Nevertheless, he welcomes the development, and is “willing to cooperate.”
“I can’t say the same for others kasi they can claim profit differently,” he warned. “Kumbaga paano [m]ado-double check ng gobyerno yun?”
In the media reports, Tionko admitted as much. As the Inquirer report writes, "[T]he government has yet to put in place a mechanism to determine the amount and actually collect tax from these digital assets."
Tionko also said that Sky Mavis, the Vietnam-based developer behind Axie Infinity, is not registered with the Bureau of Internal Revenue.
“It’s not in the Philippines, but certainly whoever earns currency from it, you should report it,” Tionko said.
Recently, Spin.ph columnist and sports law expert Mickey Ingles wrote about the taxation rules of another popular NFT-enabled digital item: NBA Top Shot.
Regarding that issue, he said, “Whatever gain you get from selling a Top Shot Moment will enter your taxable income for the year, which will be subject to the relevant tax rate depending on your tax bracket and/or if you qualify for the 8 percent gross income tax rate under TRAIN.
“As an added bonus, the sale will also be subject to 12 percent value added tax as it was done in the ordinary course of trade or business, unless your gross annual sales don’t exceed P3,000,000 — which would make you VAT-exempt.”
This story originally appeared on Spin.ph. Minor edits have been made by Esquiremag.ph editors.