THE COLLECTOR OF INTERNAL REVENUE v. ANTONIO CAMPOS RUEDA. G.R. No. L-13250.

October 29, 1971

FACTS:

Antonio Campos Rueda is the administrator of the estate of the deceased Maria Cerdeira. Cerdeira is
a Spanish national, by reason of her marriage to a Spanish citizen and was a resident of Tangier,
Morocco up to her death. At the time of her demise she left, among others, intangible personal
properties in the Philippines. The CIR then issued an assessment for state and inheritance taxes of
P369,383.96. Rueda filed an amended return stating that intangible personal properties worth
P396,308.90 should be exempted from taxes. The CIR denied the request on the ground that the law
of Tangier is not reciprocal to Section 122 (now Section 104) of the National Internal Revenue
Code.

The case was elevated to the CTA which sided with Rueda. The CTA stated that the foreign country
mentioned in Section 122 "refers to a government of that foreign power which, although not an
international person in the sense of international law, does not impose transfer or death upon
intangible person properties of our citizens not residing therein, or whose law allows a similar
exemption from such taxes. It is, therefore, not necessary that Tangier should have been recognized
by our Government order to entitle the petitioner to the exemption benefits of the proviso of Section
122 of our Tax. Code."

ISSUE: Whether the exemption is valid.

RULING:

YES.

The controlling legal provision as noted is a proviso in Section 122 of the National Internal Revenue
Code. It reads thus: "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."

It does not admit of doubt that if a foreign country is to be identified with a state, it is required in line
with Pound's formulation that it 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. A foreign country is thus a sovereign person with the
people composing it viewed as an organized corporate society under a government with the legal
competence to exact obedience to its commands.

Even on the assumption then that Tangier is bereft of international personality, the CIR has not
successfully made out a case. The Court did commit itself to the doctrine that even a tiny principality,
like Liechtenstein, hardly an international personality in the sense, did fall under this exempt
category.
CIR VS CAMPOS RUEDA (42 SCRA 238)

The Collector Of Internal Revenue vs Campos Rueda

42 SCRA 238 [GR No. L-13250 October 29, 1971]

Facts: This is an appeal interposed by herein respondent Antonio Campos Rueda as administrator of the estate of
the deceased Doña Maria de la Estrella Soriano Vda de Cedeira, from the decision of the petitioner, collector of
internal revenue, assessing against and demanding from the former the sum of Php161,874.95 as deficiency estate
and inheritance taxes, including interest therein and penalties, on the transfer of intangible personal properties
situated in the Philippines and belonging to said Maria Cedeira. She is a spanish national, by reason of her
marriage to a spanish citizen and was a resident of Tangier, Morocco from 1931 up to her death on January 2,
1955. At the time of her demise, she left among others, intangible personal properties in the Philippines. On
September 29, 1955, respondent filed a provisional estate and inheritance tax return on all the properties of Maria
Cedeira. On the same date, petitioner, pending investigation issued an assessment for estate and inheritance tax
in the respective amounts of Php111,592.48 and Php 157,791.48 or a total of Php369,383.96 which tax liabilities
were paid by respondent. On November 27, 1955, an amended return was filed wherein intangible personal
properties with the value of Php396,308.90 were claimed as exempt from taxes. On November 23, 1955, petitioner
issued another assessment for estate and inheritance taxes in the amounts of Php 202,262.40 and Php267,402.84
respectively or a total of Php469,665.24. In a letter dated January 11, 1956, respondent denied the request for the
exemption on the ground that the law of Tangier is not reciprocal with section 122 of the National Internal
Revenue Code. Hence, respondent demanded the payment of the sums of Php239,439.79 representing the
deficiency estate and inheritance taxes including ad valorem penalties, surcharges, interest and compromise
penalties. In a letter dated February 8, 1956, respondent requested for the reconsideration of the decision denying
the claim for the tax exemption. However, the same was denied. The denial was premise on the ground that there
was no reciprocity with Tangier, which was moreover a mere principality, not a foreign country.

Issue: Whether or not the intangible personal properties of Maria Cedeira are exempt from estate and inheritance
tax.

Held: Yes. The controlling legal provision as noted is a proviso in section 122 of the NIRC. It reads thus:

that no tax shall be collected under this title in respect of intangible personal properties

1. 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
personal properties of the Philippines not residing in that foreign country; or
2. 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 properties owned by citizens of the Philippines not residing in that foreign
country.

This court commit itself to the doctrine that even a tiny principality, hardly an international personality in the
sense did fall under the exempt category.

The expression “foreign country,” was used in the last proviso of section 122 of NIRC refers to a government of
that foreign power which although not an international person in the sense of international law does not impose
transfer or death upon intangible person properties of our citizens not residing therein whose law allow a similar
exemption from such taxes. It is therefore not necessary that Tangier should have been recognized by our
government in order to entitle the respondent to the exemption benefits of the proviso of said section 122 of our
tax code.

G.R. No. L-13250 May 30, 1962

THE COLLECTOR OF INTERNAL REVENUE, Petitioner, vs. ANTONIO CAMPOS

RUEDA, Respondent.

Office of the Solicitor General for petitioner.

Ramirez and Ortigas for respondent.

RESOLUTION

PAREDES, J.:chanrobles virtual law library

Do�a Maria de la Estrella Soriano Vda. de Cerdeira, (Maria Cerdeira, for short), died in
Tangier, (North Africa), on January 2, 1955. At the time of her demise, she was married
to a Spanish Citizen and a permanent resident of Tangier from 1931 up to her death, on
January 2, 1955. She left properties in Tangier as well as in the Philippines. Among the
properties in the Philippines are several parcels of land and many shares of stock,
accounts receivable and other intangible personal properties. The real estate situated in
the Philippines had a market value of P1,109,483.50 and her personal properties also in
the Philippines had a value of P396,308.90. On the real estate, the respondent Antonio
Campos Rueda, as administrator of her estate, paid the sum of P111,582.00 as estate
tax and the sum of P151,791.48 as inheritance tax, on the transfer of her real properties
in the Philippines, but refused to pay the corresponding deficiency estate and inheritance
taxes due on the transfer of her intangible personal properties, claiming that the estate
is exempt from the payment of said taxes pursuant to section 122 of the Tax Code. The
Collector of Internal Revenue in a decision assessed the estate of the deceased, as
deficiency estate and inheritance taxes, the sum of P161,874.95 including interest and
penalties, on the transfer of intangible personal properties of Maria Cerdeira. On appeal
the Court of Tax Appeals reversed the decision of the Collector, without costs, who
elevated the case to Us for review, alleging that the Court of Tax Appeals erred in
holding that -

(1) The testate estate of Maria Cerdeira is not liable for the payment of deficiency estate
and inheritance taxes in the sum of P161,874.95;chanrobles virtual law library

(2) The international zone of Tangier, even if it is not recognized by the Philippine
Government as a state, could avail of the reciprocal provisions of our Tax
Code;chanrobles virtual law library

(3) The term "foreign country" in Section 122 of the Tax Code, refers to a foreign
government competent to levy taxes without any consideration for the international
status of said government;chanrobles virtual law library

(4) There exists reciprocity between Tangier and Philippine Laws on the matter of death
taxes on intangible personal property;chanrobles virtual law library

(5) The certification Exhibits D-1, G-1, Q-1, and T, considered together, are sufficient
proof on the non-liability of movable property located in Tangier for inheritance tax
properties.

The pertinent portion of section 122, of the Tax Code, as amended by section 6, Rep.
Act No. 83, recites as follows:

SEC. 122. Definitions. - . . . . Provided, however, That in the case of a resident, the
transmission or transfer of any intangible personal property, regardless of its location, is
subject to the taxes prescribed in this Title; And provided, further, 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
personal property of citizens of the Philippines not residing in the 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.

xxx xxx xxx

In order to show the status of the law on the subject, in force or existing in Tangier at
the time of Maria Cerdeira's death in 1955, the respondent submitted certificates, the
contents of which are quoted hereunder -

Que las transmisiones hereditarias de bienes muebles situados en Tanger, no estan

sujetas a ningun impuesto sucesorio conforme al Dahir del 15 de Mayo de 1925 y Ley
del 30 de Enero de 1932, vigentes en la Zona Internacional de Tanger, sea cualquiera la
nacionalidad de los intersesados en la sucesion (Exh. "d-
1").chanroblesvirtualawlibrarychanrobles virtual law library

Que conforme la ley del 30 de Enero de 1932, en relacion con el Dahir de 15 de Mayo de
1925, al preceptuarse, que "quedan sujetos al pago del impuesto de derechos reales,
establecido para las donaciones entre vivos, las transmisiones de inmuebles por causa
de muerte acontecida a partir del 10 de Enero de 1932" deja como actos no sujetos a
ningun impuesto sucesorio, las transmisiones hereditarias de bienes muebles radicantes
en Tanger, sea cualquiera la nacionalidad de los interesados en la sucesion (Exh. "G-
1").chanroblesvirtualawlibrarychanrobles virtual law library

Praise be to God, The undersigned do hereby certify that neither Moroccan nor foreign
legatees at Tangier and its province, in the Sherifian State, are subject to any tax on
movables, with exception of real estate which is liable to inheritance tax by virtue of the
law of January 10, 1932, published in Official Bulletin No. 72 (Exh. "Q-
1").chanroblesvirtualawlibrarychanrobles virtual law library

The law of January 30, 1932 modifying the Dahir of May 15, 1925 subjecting the
transfer of real estate through deaths to the payment of registration taxes, as of January
1, 1932, subjects to no inheritance tax the successional transfers of movable property,
whatever may be the nationality of those interested in the succession (Exh. "I").

Exhibit D-1 is certified by the Register of Properties and Chief of the Bureau of Taxes at
Tangier; Exh. Q-1 by the Acting Administrator and Lands Registrar at Tangier; Exhibit Q-
1 by the Judge of the International Court at Tangier and Exhibit T, by the Governor at
the Province of Tangier..chanroblesvirtualawlibrarychanrobles virtual law library

While section 122 of the Philippine Tax Code aforequoted speaks of "intangible personal
property" in both subdivisions (a) and (b); the alleged laws of Tangier refer to "bienes
muebles situados en Tanger", "bienes muebles radicantes en Tanger" "movables" and
"movable property". In order that this Court may be able to determine whether the
alleged laws of Tangier grant the reciprocal tax exemptions required by Section 122 of
the Tax Code, and without, for the time being, going into the merits of the issues raised
by the petitioner-appellant, the case is REMANDED to the Court of Tax Appeals for the
reception of evidence or proofs on whether or not the words "bienes muebles",
"movables" and "movable property" as used in the Tangier laws, include or embrace
"intangible personal property", as used in the Tax Code. No costs.