The past few years have been challenging for the Philippine economy no thanks to the pandemic smacking it down to the point where national debt has ballooned to over PHP13 trillion or USD250 billion.
On May 20th, local time, Ferdinand Marcos, Jr. was proclaimed the next Philippine president. And as the current administration is preparing for its exit and making way for the new Marcos-led government, the country’s Department of Finance is proposing new tax measures to pay off or, at least, reduce the record-high debt. The Bureau of Treasury estimates the Philippines will need at least added PHP249 billion annually to pay the debts (at the current interest rate) without using borrowings.
The Finance department’s proposal includes:
- Deferment of personal income tax reduction, set to be enforced by 2023 under the country’s TRAIN Law. Based on the Finance Department’s recommendation to the incoming administration, the personal income tax reduction should instead take effect in 2025.
- Slapping excise duties on motorcycles, luxury goods, single-use plastics, social media influencers and gaming
- 12 per cent value-added tax for digital services (streaming services and online stores)
- Imposition of tax on carbon, more ‘sin’ products including sweetened beverages
- Imposition of tax on cryptocurrencies and other digital assets and related transactions
On taxing cryptocurrency
The DOF proposes slapping taxes on digital assets and cryptocurrency, including transactions involving these, by 2024. Based on the department’s ‘Proposed fiscal consolidation and resource mobilization plan’, the 2024 tax package seeks to also ‘clarify the tax treatments of cryptocurrency transactions’.
The DOF has not given an estimate the amount of revenue earnings should cryptocurrency and crypto transactions be taxed in the coming years. The incoming Marcos Jr. administration is yet to decide on whether it will accept the DOF’s proposal to impose duties on the local crypto industry.
Last year, the Philippine taxman has already tried to tax activities related to cryptocurrency; in particular, the earn-to-play game Axie Infinity, whose largest market is the Philippines. Mid-2021, DOF officials said the ‘earnings’ of Filipino Axie Infinity players must be declared personal income. As such, the income is taxable.
How does Axie Infinity work anyway? The game rose to popularity during the height of the pandemic when Filipinos were looking for ways to earn a living. Players grow NFT-like creatures called ‘axies’, which they can trade for cryptocurrency. They can translate the crypto coins to fiat currency through digital wallets and generate income. The DOF insisted that players who earn from the game – whether in kind or cash – must pay taxes.
Currently, there is no Philippine law or specific tax guidelines on cryptocurrency transactions and how much – if at all – these should be taxed. Nonetheless, under the Tax Code, annual gross earnings in the Philippines (from whatever source) that exceed PHP250,000 are subject to personal income tax.
Local crypto scene
The Bangko Sentral ng Pilipinas (BSP), the country’s central bank, regulates the digital currency space in the Philippines. As of November 2020 (the latest), the BSP is regulating only 17 local cryptocurrency exchanges, which had to register as Remittance and Transfer Companies (RTC) with Virtual Currency (VC) Exchange Services and place measures to prevent money laundering, fraud and cybercrime attacks, amongst others.
About 4.3 million Filipinos are crypto investors. The Philippine cryptocurrency market is burgeoning. 2020 data from Statista showed that crypto transactions in the country had reached 7.2 million – a 36 per cent growth from the previous year.
Administrating crypto funds
Cryptocurrency is a significantly newer game than the centuries-old financial system, which covers banks and other traditional financial institutions. The digital currency space is highly unique. As the times evolve, so does the way we transact. We understand that at Bolder; and we understand the need for people that crypto fund managers and crypto investors can trust.
To protect, diversify and grow your cryptocurrency portfolio and investments, you can count on Bolder Group to extend our crypto fund administration services as well as our compliance solutions, so you don’t have to worry about the burden of reporting, KYC measures and AML requirements.
Learn more about how we can help you. Contact us today.
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