Is DeFi Yield Taxable in the Philippines in 2025? Your Essential Tax Guide

Introduction: Navigating DeFi Taxes in the Philippines

As decentralized finance (DeFi) reshapes investing in the Philippines, yield farming and staking rewards have become lucrative opportunities. But with the Bangko Sentral ng Pilipinas (BSP) and Bureau of Internal Revenue (BIR) increasing crypto oversight, Filipino investors urgently ask: Is DeFi yield taxable in the Philippines in 2025? While 2025 regulations aren’t finalized, current tax frameworks and global trends suggest clear compliance requirements. This guide breaks down what to expect and how to prepare.

Understanding DeFi Yield and Its Tax Implications

DeFi yield refers to earnings from crypto activities like:

• Liquidity mining (providing tokens to pools)
• Staking (locking crypto to support blockchains)
• Lending protocols (earning interest on deposits)

Unlike bank interest, DeFi operates without intermediaries—but tax authorities still consider these gains taxable income. The BIR’s current stance (via RMC 68-2020) treats cryptocurrencies as property, making yields subject to income tax.

Philippine Tax Laws: 2023 Baseline and 2025 Projections

As of 2023, the BIR taxes crypto under two categories:

1. Capital Gains Tax (CGT): 15% on profits from selling assets held as investments.
2. Ordinary Income Tax: Progressive rates (0-35%) on active earnings like trading or yield farming.

By 2025, experts predict stricter guidelines specifically addressing DeFi, driven by:

• BSP’s push for Virtual Asset Service Provider (VASP) licensing
• OECD’s crypto tax reporting standards adoption
• Increased blockchain analytics capabilities for BIR audits

How DeFi Yield Will Likely Be Taxed in 2025

Based on global precedents and Philippine tax principles, expect:

• Yield Farming/Liquidity Mining: Treated as ordinary income at progressive rates (20-35% depending on annual earnings). Taxable upon receipt.
• Staking Rewards: Taxed as income when tokens are controlled or sold. Possible CGT upon disposal if held long-term.
• Lending Interest: Similar to bank interest—subject to income tax.

Note: Transactions under ₱500,000/year may qualify for the 8% simplified tax option under TRAIN Law.

Critical Compliance Steps for Filipino DeFi Investors

Prepare for 2025 with these actions:

1. Track all yield transactions (dates, amounts, token values in PHP)
2. Use tax software like Koinly or CoinTracker for automated reporting
3. Separate personal and DeFi wallets for clearer auditing
4. Document gas fees and network costs as deductible expenses

Penalties for Non-Compliance

Failure to report DeFi income risks:

• 25-50% surcharge on unpaid taxes
• 12-24% annual interest on liabilities
• Criminal charges for willful evasion under Tax Code Section 255

FAQs: DeFi Taxes in the Philippines (2025)

Q1: Is all DeFi yield taxable in 2025?
A: Yes. The BIR will likely treat rewards from farming, staking, and lending as taxable income, mirroring 2023 guidance.

Q2: How does DeFi taxation differ from stock dividends?
A: Stock dividends have a 10% final tax. DeFi yields lack this preferential rate and face higher ordinary income taxes.

Q3: Can I offset losses from impermanent loss?
A: Possibly. If classified as capital assets, net losses may be deductible against capital gains—but confirm with a tax professional.

Q4: Do I pay tax if I reinvest yields?
A: Yes. Taxation typically occurs when you receive or control the tokens, regardless of reinvestment.

Q5: How should I report DeFi income?
A: Include it in your Annual Income Tax Return (BIR Form 1701) under “Other Income” or “Business Income.”

Q6: Will Binance or other exchanges report my earnings?
A: Only BSP-licensed VASPs must report user data. Use self-custody wallets? You’re solely responsible for disclosure.

Conclusion: Stay Proactive, Stay Compliant

While 2025’s DeFi tax rules aren’t set in stone, Philippine investors should assume yields are taxable and maintain meticulous records. Monitor BIR announcements and consult a crypto-savvy CPA to avoid penalties. As DeFi evolves, informed compliance remains your best strategy for profitable—and legal—participation in this digital economy.