Red flags raised by the government? Philippines Department of Finance: Securities nature of Axie Infinity yet to be defined, but subject to taxation

The concept of GameFi has risen rapidly in the past few months, with Axie Infinity leading the way and gaining popularity in the Southeast Asian region. However, this has also caught the attention of the Philippines Department of Finance, which pointed out that income earned through online games is subject to taxation.

Axie Securities Attributes Yet to Be Defined

According to local media Manila Bulletin's report, Tionko, the revenue operations group head of the Philippines' Department of Finance (DOF), revealed that they are currently investigating the blockchain game Axie Infinity with the Bureau of Internal Revenue (BIR).

Tionko stated:

The Department of Finance, along with the Bangko Sentral ng Pilipinas (BSP) and the Securities and Exchange Commission (SEC), have yet to determine whether the Axie Infinity AXS token is a security or not. However, regardless of the classification, it falls under taxable events and income tax must be paid.

Taxation on Domestic Income

Tionko also pointed out that Axie Infinity is not registered with the Bureau of Internal Revenue (BIR) in the Philippines, stating:

Although Axie Infinity is not registered in the Philippines, any income generated within the country should be covered by local taxation, and the company should report on anyone earning tokens through the game.

Furthermore, Tionko emphasized that based on tax principles, all income earned through online games in the past few months should be subject to income tax.

Axie Infinity

Axie Infinity, referred to as Axie, is issued on the Ethereum blockchain by the Vietnamese game developer SkyMavis. Axie players can breed and trade virtual pets within the game.

Axie also incorporates a popular three-on-three Player versus Player (PvP) battle mechanism, where players can earn in-game reward tokens called Smooth Love Potion (SLP) through battles, adventures, and completing daily quests.

Axie's popularity has been sustained for several months, with the AXS token surging over 1,200% since July. However, the in-game reward token SLP has been on a continuous decline over the past two months due to oversupply, prompting the officials to announce further adjustments to the token economy.

According to data from TokenTerminal, Axie Infinity's revenue still ranks at the top among all protocols, with a revenue of up to $370 million in the past 30 days, slightly lower at $75 million in the past seven days compared to Ethereum's $82.9 million.