How to Pay Taxes on Airdrop Income in the Philippines: A Complete Guide

With the rise of cryptocurrency, airdrops have become a popular way for projects to distribute tokens to users. But did you know that airdrop income is taxable in the Philippines? The Bureau of Internal Revenue (BIR) treats crypto airdrops as taxable income under existing laws. This guide explains your tax obligations, calculation methods, and filing procedures to stay compliant with Philippine regulations.

How Airdrops Work in the Crypto Space

Airdrops involve free distribution of cryptocurrency tokens or coins to wallet addresses, often to promote new projects or reward loyal users. Common types include:

• Standard Airdrops: Tokens sent automatically to holders of a specific blockchain currency.
• Bounty Airdrops: Rewards for completing social media tasks or referrals.
• Holder Airdrops: Distributions based on existing token holdings.

Unlike mined or traded crypto, airdrops don’t require upfront payment – but they still create tax liabilities under Philippine law.

Tax Obligations for Airdrop Income in the Philippines

The BIR classifies airdrop tokens as taxable income under Section 32(A) of the National Internal Revenue Code. Key rules include:

• Airdrops are taxed at fair market value when received, converted to Philippine pesos.
• Income falls under “Other Income” on your tax return (BIR Form 1701).
• Tax rates follow progressive income tax brackets (up to 35%) under the TRAIN Law.
• If you sell airdropped tokens later, capital gains tax may apply separately.

Note: Even small airdrops must be reported if your total annual taxable income exceeds ₱250,000.

How to Calculate and Report Airdrop Income

Follow these steps to determine your tax dues:

1. Record receipt date: Note when tokens hit your wallet.
2. Determine fair value: Use exchange rates (e.g., Binance, PDAX) at receipt time.
3. Convert to PHP: Calculate peso value using BIR-approved forex rates.
4. Include in gross income: Add to Line 38 (Other Income) on BIR Form 1701.
5. File annually: Submit by April 15 for the preceding tax year.

Example: Receiving $100 worth of tokens (at ₱55/$) = ₱5,500 taxable income.

Consequences of Not Reporting Airdrop Income

Failing to declare airdrop earnings risks:

• Penalties: 25-50% surcharge on unpaid taxes + 12% annual interest.
• Legal action: Tax evasion charges under R.A. No. 8424 (punishable by imprisonment).
• Audit triggers: Discrepancies between exchange reports and tax filings.

The BIR actively monitors crypto transactions through third-party data sharing agreements.

Tips for Compliant Tax Filing

• Maintain detailed records: Wallet addresses, receipt dates, and token values.
• Use crypto tax software: Tools like Koinly or Accointing automate PHP conversions.
• Consult a BIR-accredited accountant: Especially for large airdrops or complex portfolios.
• Declare even unsold tokens: Tax applies upon receipt, not conversion to fiat.

Frequently Asked Questions (FAQ)

1. Are all crypto airdrops taxable in the Philippines?

Yes. The BIR considers any airdropped tokens as income subject to regular income tax, regardless of amount or project origin.

2. How do I value airdrops in Philippine pesos?

Use the token’s fair market value in USD (from major exchanges like Binance) at receipt time, converted to PHP using the BIR’s exchange rate for that day.

3. What if I receive tokens worth less than ₱250,000 annually?

You still must report it, but no tax is due if your total annual taxable income (including airdrops) doesn’t exceed ₱250,000.

4. Do I pay taxes when I sell airdropped tokens?

Yes. Selling triggers capital gains tax if held as investment (15% on net gains) or regular income tax if traded frequently.

5. Can the BIR track my airdrop income?

Increasingly yes. Philippine exchanges report transactions to the BIR under RMC No. 65-2022. Use undisclosed wallets at your own risk.

Disclaimer: This guide provides general information. Consult the BIR or a tax professional for personalized advice on paying taxes on airdrop income in the Philippines.