Players of Axie Infinity, a popular online game, should pay income tax on their earnings from selling game “pets”, according to the Department of Finance (DOF).
“Whoever earns currency from it, it’s income you should report it,” said Finance Undersecretary Antonette Tionko.
Due to the prolonged community quarantine, thousands of Filipinos have become addicted to playing Axie Infinity, a play-to-earn game where players earn cryptocurrency and non-fungible tokens (NTFs) by growing fantasy creatures called “axies”.
While players cannot yet monetize the NTFs, trading pet axies online generates thousands of pesos when sold.
Regardless of whether axies are paid by money or in kind, Tionko said these transactions are taxable.
Tionko said even the cryptocurrency earned in Axie Infinity is taxable, although government has yet to put in place a mechanism to determine the amount and actually collect tax from these digital assets.
“Cryptocurrency is an asset, so it’s taxable in the Philippines. What kind of tax applies? The gains are subject to income tax,” said Tionko.
“Is it a security? Is it a currency? So those are the things that will help us define the rules on how it should be taxed. But regardless of how it is characterized, it’s taxable—subject to income tax,” Tionko added.
For Sky Mavis, the Vietnamese game developer of Axie Infinity, its earnings from the game cannot be captured just yet by the BIR of the Philippines.
Tionko said Sky Mavis is a non-resident foreign corporation which is not registered in the Philippines.
“That is one of the things that we hopefully capture once we have that system of registration for non-residents, those types of companies not in the Philippines,” Tionko said. Pending in Congress are bills aimed at collecting 12% value-added tax from digital goods and services, especially transactions through global online platforms.