G.R. No.

L-13250 October 29, 1971

THE COLLECTOR OF INTERNAL REVENUE, petitioner,
vs. ANTONIO CAMPOS RUEDA, respondent

(PRINCIPLE LAID DOWN IN THE CASE: – Definition of “State”)

FACTS:
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 country.

ISSUE: Whether or not Tangier is a state.

RULING: 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.

WHEREFORE, the decision of the respondent Court of Tax Appeals of October 30, 1957 is
affirmed.