Axie Infinity is the game based on NFTs (non-fungible tokens) that have been taking the news around the world in recent months, with reports of users who are already able to maintain a monthly income just by playing. However, the possibility of making money in an unregulated way and in cryptocurrencies has not gone unnoticed by the government of the Philippines, where the game is particularly popular. Now, authorities are looking for a way to tax players’ earnings.
“Cryptocurrencies are assets, so they are already taxable in the Philippines… Anyone who makes money from it (Axie Infinity) must declare the earnings, as they are income,” Philippines Deputy Finance Director Antonette Tionko told inquire this week.
Gambling generates income so it is taxable
Axie Infinity has emerged as a popular way to pass the time for citizens of the Philippines in the midst of the COVID-19 pandemic, with the advantage of earning money through the game’s native cryptocurrencies and their NFTs. Its “play to win” model began allowing people to pay monthly bills and put food on the table after losing their jobs at the height of quarantine.
The largest share of gamers is concentrated in the Philippines, currently just over 40%, according to the company behind the game, a Vietnamese startup called Sky Mavis. Its model and gameplay are similar to Pokémon and Neopets games, being the Axies little creatures that can be acquired, reproduced, trained, used in combat and, above all, sold.
Each of these little monsters is an NFT, or non-fungible token, a type of digital asset created, registered, and authenticated on a blockchain network. Players’ earnings can occur through the sale of Axies or the game’s native cryptocurrencies, Axie Infinity Shards (AXS) and Small Love Potion (SLP), obtained from brokers or in-game through missions and competitions between players, respectively.
Authorities don’t know how to tax Axie Infinity
However, no one really knows what the new tax will mean for Axie Infinity players. On the one hand, taxing earnings seems justifiable once there is income. Regulators, on the other hand, don’t really know what to tax. Cryptocurrencies? The NFTs? The gain converted to fiat currency?
AXS, for example, is traded on brokers such as Coinbase. Users can buy digital currency using traditional money or exchanging it for other cryptocurrencies. According to Sky Mavis, the native currency will also serve as a governance token in the future, allowing holders to have a say in game development.
The SLP, on the other hand, is given to players while spending time in the game. A player can earn these tokens by completing quests and fighting other Axies. The more a person plays, the more SLP they are likely to have in their virtual wallet. The two cryptocurrencies are important because they can be used to create new little monsters.
The decision on whether the Axies will be taxed or whether the authorities will go back only to in-game tokens will likely be determined by the Philippines’ central bank or the country’s Securities and Exchange Commission, according to Tionko.
“Is it a reservation? Is it a coin? So these are these things that will help us set the rules for how this should be taxed. But, regardless of how it is characterized, it is taxable and subject to income tax”, she told the inquire.
With information: Inquire