Case Summary (G.R. No. L-13250)
Factual Background
Upon the death of Doña María de la Estrella Soriano Vda. de Cerdeira on January 2, 1955, her administrator filed a provisional estate and inheritance tax return covering all properties, including intangible personal assets situated in the Philippines. The Collector of Internal Revenue assessed and collected initial taxes, then issued a second assessment after an amended return claimed exemption for Philippine-located intangible assets valued at ₱396,308.90. The Collector denied the exemption on the ground that Tangier was not a “foreign country” under Section 122 of the National Internal Revenue Code and that its laws did not grant reciprocal treatment. The Collector demanded ₱161,874.95 as deficiency estate and inheritance taxes, including penalties and interest.
Procedural History
- Collector’s assessments and denials (1955–1956)
- Administrative appeal rejected; deficiency demand maintained
- Petition elevated to the Court of Tax Appeals (CTA)
- CTA ruled in favor of the estate administrator, holding that Tangier’s laws provided the required reciprocity and that international personality was not a prerequisite to Section 122 exemption
- Supreme Court remanded for proof whether Tangier’s “movables” laws encompassed “intangible personal property” (May 30, 1962)
- CTA admitted evidence showing Tangier exempted transfers of both corporeal and incorporeal movables without regard to nationality (hearing on September 9, 1963)
- Case deemed submitted (July 29, 1969)
- Petition for review reacquired by Supreme Court
Applicable Law
National Internal Revenue Code (Commonwealth Act No. 466, as amended) Section 122 proviso:
• Exempts from tax any intangible personal property if, at decedent’s death, the foreign country of residence either did not impose transfer/death taxes on Philippine citizens or granted equivalent exemptions.
Issue Presented
Whether “foreign country” in Section 122 must possess full international personality (statehood under international law) or whether a polity lacking such personality—so long as its law grants reciprocal exemptions—qualifies for the Section 122 exemption.
Court of Tax Appeals’ Decision
The CTA held that:
• “Foreign country” refers to any government that does not tax the intangible personal property of Filipino citizens or grants equivalent exemption, regardless of its international-law status;
• Tangier’s legislation exempted transfers of movables (corporeal and incorporeal), including securities, without imposing death taxes, thus satisfying reciprocity;
• International recognition of Tangier as a sovereign state was unnecessary to invoke Section 122’s exemption.
Supreme Court Analysis
- Precedent in Collector of Internal Revenue v. De Lara (102 Phil. 813, 1958) held that California—lacking separate international personality—nonetheless qualified as a “foreign country” under Section 122.
- Kiene v. Collector of Internal Revenue (97 Phil. 352, 1955) recognized Liechtenstein—a principal
Case Syllabus (G.R. No. L-13250)
Facts
- Maria de la Estrella Soriano Vda. de Cerdeira (“Maria Cerdeira”) was a Spanish national by marriage and resident of Tangier, Morocco from 1931 until her death on January 2, 1955.
- At her death, she owned intangible personal properties located in the Philippines.
- Antonio Campos Rueda, as administrator of her estate, filed a provisional estate and inheritance tax return on September 29, 1955, reporting all her properties and paying assessed taxes of P269,383.96.
- An amended return filed November 17, 1955, claimed exemption for intangible personal properties valued at P396,308.90.
- The Collector of Internal Revenue issued subsequent assessments and denied exemption, asserting Tangier was not a “foreign country” under Section 122 of the National Internal Revenue Code and lacked reciprocal tax exemption.
Procedural History
- September 29, 1955: Provisional tax return filed; initial assessments paid.
- November 17, 1955: Amended return claimed exemption; new assessments issued.
- January 11, 1956: Collector denied exemption, demanding payment of deficiency taxes (P239,439.49).
- February 8 – May 5, 1956: Petitioner sought reconsideration; request denied; final demand of P161,874.95.
- Appeal to the Court of Tax Appeals (CTA) contesting the Collector’s refusal.
- CTA ruled in favor of respondent, finding Tangier qualified as a “foreign country” under Section 122.
- May 30, 1962: Supreme Court remanded to CTA to determine reciprocity under Tangier law.
- September 9, 1963: CTA admitted evidence showing Tangier’s laws exempted movable properties, corporeal or incorporeal, from death taxes.
- July 29, 1969: CTA submitted the case for decision; Supreme Court review thereafter.
Issue
- Whether Tangier, Morocco, lacking recognized international personality, qualifies as a “foreign countr