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In January 1955, Maria Cerdeira died in Tangier, Morocco (an international zone [foreign country] in North
Africa). At the time of her death, she was a Spanish citizen and was a resident of Tangier. She however left
some personal properties (shares of stocks and other intangibles) in the Philippines. The designated
administrator of her estate here is Antonio Campos Rueda.
In the same year, the Collector of Internal Revenue (CIR) assessed the estate for deficiency tax amounting to
about P161k. Campos Rueda refused to pay the assessed tax as he claimed that the estate is exempt from the
payment of said taxes pursuant to section 122 of the Tax Code which provides:
That no tax shall be collected under this Title in respect of intangible personal property
(a) if the decedent at the time of his death was a resident of a foreign country which at the time of his death
did not impose a transfer tax or death tax of any character in respect of intangible person property of the
Philippines not residing in that foreign country, or
(b) if the laws of the foreign country of which the decedent was a resident at the time of his death allow a
similar exemption from transfer taxes or death taxes of every character in respect of intangible personal
property owned by citizens of the Philippines not residing in that foreign country.
Campos Rueda was able to prove that there is reciprocity between Tangier and the Philippines.
However, the CIR still denied any tax exemption in favor of the estate as it averred that Tangier is not a “state”
as contemplated by Section 22 of the Tax Code and that the Philippines does not recognize Tangier as a foreign
ISSUE: Whether or not Tangier is a state.
HELD: Yes. For purposes of the Tax Code, Tangier is a foreign country.
A foreign country to be identified as a state must be a politically organized sovereign community independent
of outside control bound by penalties of nationhood, legally supreme within its territory, acting through a
government functioning under a regime of law. The stress is on its being a nation, its people occupying a
definite territory, politically organized, exercising by means of its government its sovereign will over the
individuals within it and maintaining its separate international personality.
Further, the Supreme Court noted that there is already an existing jurisprudence (Collector vs De Lara) which
provides that even a tiny principality that of Liechtenstein, hardly an international personality in the
sense, did fall under the exempt category provided for in Section 22 of the Tax Code. Thus, recognition is not
necessary. Hence, since it was proven that Tangier provides such exemption to personal properties of
Filipinos found therein so must the Philippines honor the exemption as provided for by our tax law with
respect to the doctrine of reciprocity.