Amid the enormous success of crypto-powered game Axie Infinity in the Philippines, the local Department of Finance has made clear that it wants a cut of profits generated by playing Axie and other play-to-earn games.
An August 23 report from Inquirer cites Philippine Finance Undersecretary Antonette Tionko as clarifying that any profits gleaned through play-to-earn games are subject to income tax.
“Cryptocurrency is an asset, so it’s already taxable in the Philippines [...] whoever earns currency from it, it’s income you should report it,” she said.
While the official asserted that that play-to-earn gains “are subject to income tax,” Tionko conceded that lawmakers are yet to classify whether Axie’s in-game NFTs or native tokens Smooth Love Potion (SLP) and Axie Infinity Shards (AXS) are deemed to be securities or currencies.
She added that the matter should be determined by the local central bank and Securities and Exchange Commission:
“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.”
While both the SLP and AXS tokens are earned through playing Axie Infinity, SLP functions as an in-game currency while AXS is the governance token of the Axie community.
Play-to-earn gaming exploded in popularity across the Philippines amid the pandemic, with the surging price of crypto assets meaning that locals could generate a decent income comparable to local wages by playing Axie Infinity.
Tionko also highlighted that Sky Mavis, the Vietnamese game studio that developed Axie Infinity, is not registered with the Philippine Bureau of Revenue despite generating income from sources based within 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."
The news sparked selling in the SLP markets, with the token crashing by as much as 15% on Aug. 24 before closing the day at a nearly 7% draw-down.
SLP has produced a rollercoaster performance over recent months, suddenly rocketing by more than 900% from $0.035 on April 26 to top out at a record high of above $0.36 on May 2, according to CoinGecko.
Since then, SLP has violently oscillated between roughly $0.13 and $0.35, with the markets currently down 60% from July’s local top.