How Digital Assets Are Taxed in the Philippines: What Investors Must Know
Confused about the digital assets tax in the Philippines? Learn how Philippine tax rules may apply to crypto gains, income, and investment schemes.
Digital assets such as cryptocurrencies are not governed by a single "crypto tax" law in the Philippines. Instead, existing tax rules apply based on what a person actually does with the asset. Gains from selling or trading digital assets may be treated as income subject to Philippine income tax under the National Internal Revenue Code of 1997, as amended by Republic Act No. 10963 (the TRAIN Law). If the digital asset forms part of an investment scheme offered to the public, securities regulation may also apply. The key is classifying the transaction correctly.
Is there a specific law that taxes digital assets in the Philippines?
There is no standalone statute that imposes a tax specifically on digital assets. Philippine tax exposure arises from how the transaction is characterized under the Tax Code.
Under Section 24 of the National Internal Revenue Code of 1997, as amended by Republic Act No. 10963, income tax is imposed on the taxable income of individual citizens and resident aliens. Section 31 defines taxable income as pertinent items of gross income less deductions authorized by the Code or special laws.
If a digital asset is sold, exchanged, or used to generate profit, the resulting gain may form part of gross income and be subject to income tax at the applicable graduated rates. The TRAIN Law's schedule for individuals shows that income not over P250,000 is taxed at 0%, with higher brackets taxed from 15% up to 35% effective January 1, 2023 and onwards.
How is income from digital assets treated?
The Tax Code does not create a separate category for digital assets. The analysis depends on the nature of the activity:
- Trading or selling for profit. Gains may be treated as income and included in the taxpayer's taxable income.
- Receiving digital assets as payment for services. The value received may be treated as gross income from the practice of profession or conduct of business.
- Holding digital assets. Mere holding generally does not trigger income tax until a taxable event such as a sale or exchange occurs.
Section 51 of the National Internal Revenue Code of 1997 requires individuals subject to income tax to file returns, subject to exceptions. An individual whose taxable income does not exceed P250,000 under Section 24(A)(2)(a) is not required to file, but a citizen engaged in business or practice of profession within the Philippines must file regardless of gross income.
When do securities rules apply to digital asset investments?
Some digital asset arrangements are not merely investments in property; they may be investment contracts and therefore securities under Philippine law.
In SEC CDO Case No. 01-24-107, the Securities and Exchange Commission examined a scheme involving cryptocurrency investment packages. The SEC applied the Howey Test, which requires: (1) an investment of money, (2) in a common enterprise, (3) with the expectation of profits, (4) derived solely from the efforts of others.
The SEC ruled that a transaction or scheme where a person uses or intends to use money or property of others with a promise of profits is presumed to be an investment contract, which must be registered with the Commission before it is offered or sold. Offering unregistered securities violates Sections 8 and 28 of the Securities Regulation Code.
What are the compliance obligations?
For tax purposes, income from digital asset transactions must be reported in the taxpayer's income tax return. Under Section 51-A of the National Internal Revenue Code of 1997, substituted filing applies only to employees receiving purely compensation income from one employer, so it generally does not cover trading or business income from digital assets.
For securities purposes, any person or entity offering investment opportunities involving digital assets to the public must register the securities with the SEC unless an exemption applies. The SEC may issue a cease and desist order to restrain unauthorized offerings under the Securities Regulation Code, as discussed in SEC CDO Case No. 01-24-107.
Frequently asked questions
Do I need to pay tax if I only bought crypto and did not sell it? Generally, no income tax event occurs from mere holding. Income tax typically arises when there is a sale, exchange, or receipt of income.
Are crypto gains taxable in the Philippines? Gains from selling or trading digital assets may form part of taxable income under the National Internal Revenue Code of 1997, as amended, and must be reported if the taxpayer is required to file.
What if I joined a crypto investment scheme that promised returns? If the scheme involves investment of money in a common enterprise with profits from the efforts of others, it may be an unregistered security. The SEC has acted against such schemes in SEC CDO Case No. 01-24-107.
Practical takeaways
- There is no single digital assets tax law; existing income tax rules under the National Internal Revenue Code of 1997, as amended by Republic Act No. 10963, apply based on the transaction.
- Gains from selling or trading digital assets may be taxable income and should be reported if a return is required.
- Investment schemes involving digital assets may be securities subject to SEC registration under the Securities Regulation Code.
- The SEC applies the Howey Test to determine whether a digital asset arrangement is an investment contract.
- Consult a tax lawyer or accountant to classify specific transactions correctly.
Primary sources
The rules discussed above are drawn from the following primary sources. Where the firm's library holds the document as a PDF it is embedded here in full; the rest are cited by title.
RMC No. 06-2003 — Clarifies certain issues relative to the services rendered by individual professional practitioners, general professional partnerships, entertainers and professional athletes who are subject to the Value-Added Tax or Percentage Tax beginning January 1, 2003 Digest | Full Text | Annex AOpen in Law LibraryDownload PDF
SEC CDO CASE NO. 01-24-1750K CLUB / 50K CLUBB ONLINE SHOP / COMMUNITY HELP COIN (CHC) / CRYPTOMARKETERS / CRYPTOMARKETERS WORLDWIDEOpen in Law LibraryDownload PDF
- REPUBLIC ACT NO. 10963 - AN ACT AMENDING SECTIONS 5,6, 24,25, 27, 31, 32, 33, 34, 51, 52, 56, 57, 58, 74, 79, 84, 86, 90, 91, 97, 99, 100, 101, 106, 107,108,109,110,112,114,116,127,12S, 129, 145, 148,149,151,155,171,174,175,177,178,179,180, 181, 182, 183,186,188,189,190,191,192, 193,194,195, 196, 197,232, 236,237,249, 254, 264,269, AND 288; CREATING NEW SECTIONS 51-A, 148-A, 150-A, 150-B, 237-A, 264-A, 264-B, AND 265-A; AND REPEALING SECTIONS 35,62, AND 89; ALL UNDER REPUBLIC ACT NO. 8424, OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES
This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.
This topic sits within our Tax Law & Compliance practice.
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