BIR, DOF are Looking Into Axie Infinity, Earnings are Taxable says Finance Undersecretary

The Department of Finance (DOF) Undersecretary Antonette C. Tiono said earnings Filipinos get from playing online games are taxable, she told Manila Bulletin, before disclosing that both the department and the Bureau of Internal Revenue (BIR) are looking into Axie Infinity, the popular game by Sky Mavis, a Vietnam-based video game company.

In Axie Infinity, players earn the cryptocurrency SLP in-game when they win battles. The SLP can be traded into pesos through peer-to-peer (P2P) or through virtual currency exchanges. The game has been very popular in the Philippines, with people who lost their jobs effectively surviving the pandemic and lockdown by playing and making money from Axie Infinity. 

Tiono said the Bangko Sentral ng Pilipinas (BSP) and the Securities and Exchange Commission (SEC) have yet to do proper classification for Axie (Security or Currency?) but she said regardless of its classification, earnings are taxable. “Regardless of how it is characterized, it’s taxable and subject to income tax.”

In a previous interview, BSP Deputy Director Leah Irao said the central bank is looking into Axie Infinity but has no specific guidance about the game. She did, however, remind the public to transact only with registered entities. The Deputy Director also disclosed that the BSP has become aware of Axie Infinity because of media inquiries and requests that the central bank has received about the game. (Read More: BSP Director: No Specific Guidance on NFT Games (Report))

According to an estimation from Luis Buenaventura II, the co-founder of BloomX, which is one of the licensed virtual currency exchanges in the country. In a newsletter last July, he estimated that earnings of roughly Php 2 billion are remitted to the Philippines by players making money through the game. He added, “To put that into perspective: 2 billion pesos is the average amount of remittances that ALL the OFWs living in Hong Kong send back home to the Philippines each month. But there are 800,000 of them stationed there! And don’t even get me started on how exploitative their living conditions are. Meanwhile, these Axie gamers are playing from their own bedrooms 3-4 hours a day, and making 4x as much. (Not to mention that they’re spending their money here, bolstering the local economy.)”

In another newsletter, Luis said that while he doesn’t think Axie Infinity is a ponzi scheme, there are valid concerns that the BSP or the SEC would go after the game. Axie not being a payments system and Sky Mavis, the developer of the game, not directly soliciting gamers to invest would mean the game would not be asked to stop operations on the same grounds as Lyka, which the BSP thinks is an operator of payments services. “This is a critical distinction that puts it outside of the BSP jurisdiction, because the game platform itself doesn’t engage in the conversion of peso to crypto, and only accepts payments within its own ecosystem,” said Luis. “So if the government does go after Axie, it will [likely be] for different reasons,” he concluded.

Undersecretary Tiono of the DOF also added that Sky Mavs’ income that is derived from sources in the country “should be covered by local taxes,” the Manila Bulletin reported. “That is one of the things that we hopefully capture once we have that system of registration for non-residents. It’s not in the Philippines, but certainly whoever earns currency from it, you should report it,” Tiono said, while reminding the public that all money-earning schemes are taxable. 

“Remember the principle of taxation, it’s a flow of wealth,” Tiono said.

This article is published on BitPinas: BIR, DOF are Looking Into Axie Infinity, Earnings are Taxable says Finance Undersecretary

Source: https://bitpinas.com/regulation/bir-dof-axie-infinity-tax/