In the midst of the fast growth in the appeal of multiplayer online video games that enable gamers to make money, Department of Finance Undersecretary Antonette C. Tionko stated that gains from these gaming networks are liable to taxation.
Tionko said that the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) are probing the adventure online game Axie Infinity, produced by a Vietnamese company Sky Mavis. Gamers may acquire in-game cryptocurrency that can subsequently be sold and swapped for pesos in Axie Infinity, a blockchain game whose fame exploded in the Philippines during the epidemic.
Last Monday, Tionko told journalists, "Anyone who ends up getting money from it, it's earnings you must declare."
Thousands of Filipinos are becoming hooked to play-to-earn games like Axie Infinity, where users earn bitcoin and non-fungible tokens (NFTs) by raising imaginary creatures called “Axies”, revealed by CNBC in May 2021.
While gamers cannot currently profit from the NFTs they acquire in the video game, selling pet Axies online may bring them thousands of pesos. Tionko stated that “Axies are taxed irrespective of whether they are traded in cash or substance”.
However, to start the game, users must first acquire three digital creatures known as "Axies," which they will breed to create avatars who will fly on the battleground. The incentives for winning the combat are bitcoins. Tionko did concede, meanwhile, that the Securities and Exchange Commission (SEC) and the Bangko Sentral ng Pilipinas are still debating if “Axie” is a currency or security (BSP). “But it's taxable, liable to income tax, irrespective of how it's described,” said Tionko, who leads the DOF's Revenue Operations Group.
An Axie used to cost approximately 250 pesos, but owing to the online game's fast growth in demand, its cost has risen to about 33000 pesos per digital creature.
In addition, the bitcoins gained in Axie Infinity are taxed, according to Tionko, but the authorities have yet to establish a method to calculate the value and receive the taxes on these digital assets. Because cryptocurrency is considered an asset, it is already subject to taxation in the Philippines.
But, what type of taxes do you have to pay?
According to Tionko, “Surely the profits are liable to income tax”. However, when you get down to the nitty-gritty, a majority of it will be determined by its categorization, something I believe will be decided by the SEC and the BSP.”
Furthermore, Tionko stated that Axie Infinity's inventor is not listed with the BIR. Even though Sky Mavis is a foreign organization, she believes that the firm's money earned in the Philippines must be taxed locally. In the Philippines, it is not licensed. It is one of the elements we want to catch now that we have the non-resident identification program in place.
It is not in the Philippines, but anyone who gets money through it should disclose it, according to Tionko. In the meantime, Tionko warned the public that all online moneymaking techniques that have swept the digital arena in recent months are liable to income tax.
“Is it a matter of safety? Is it a medium of exchange? Now, these factors can assist us to determine the regulations for taxation. However, irrespective of how it's defined, it's taxable, meaning it is subject to income tax,” Tionko remarked.
However, Tionko stated that purchasing tokens to enjoy the video game is not taxable. “Recollect the taxes philosophy: it's a stream of income. So purchasing is not a source of riches. If you acquired it at a bargain, it could be taxable to them, but it gets into the nitty-gritty,” she explained.
Sky Mavis, the Vietnamese game developer behind Axie Infinity, is still waiting for tax officials in the Philippines to recognize its revenues from the game.