POLILAWREV SARMIENTO 18 THE PHILIPPINES AS A STATE

Collector of Internal Revenue vs. Antonio Campos Rueda (1971)

CASE SUMMARY
The Estate of Maria Soriano, a Spaniard residing in the principality of Tangier, Morocco,
claimed as exempt from inheritance and estate taxes the intangible personal properties she
left in the Philippines. The CIR disagreed, saying that as a mere principality, Tangier lacked
statehood and therefore not a foreign country. The CTA and the SC both ruled that Tangier,
while not possessing international personality, is considered a foreign country for purposes
of tax exemption under Sec. 122 of C.A. 466. In its ratio decidendi, the Court defined what a
state is.
Facts

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Doa Maria de la Estrella Soriano Vda. de Cerdeira (hereinafter, the deceased),

a Spanish national residing in Tangier, Morocco at the time of her death, died leaving,
among others, intangible personal properties situated within the Philippines. In the
estate and inheritance tax returns, the estate administrator declared these properties
exempt by virtue of Section 122 of Commonwealth Act. 466, which imposed two
requisites:
(1) that the deceased was a resident of a foreign country at the time of his/her death;
and
(2) that the foreign country granted a similar tax exemption from transfer,
inheritance or estate taxes on intangible personal property owned by citizens of the
Philippines not residing in said foreign country (reciprocity).
The Commissioner of Internal Revenue, however, disagreed that the intangible
properties were exempt on the ground that Tangier is not a foreign country but a mere
principality, and that there was no reciprocity of exemption.
Hence, CIR assessed the estate of the deceased for deficiency estate and
inheritances taxes.
The administrator of the estate of the deceased raised the matter to the CTA,
which ruled in the estates favour, thus: the expression foreign country, used in the
last proviso of Section 122 of the [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 taxes upon intangible personal 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
The CIR appealed the CTA decision to the SC, which sent it back to the CTA for the
reception of evidence and inquire further into the question of reciprocity. After the
administrator of the estate satisfied the CTA of the presence of reciprocity, the case was
referred back to the SC.

Issue: W/N the requisites of statehood must be satisfied for a foreign country to
fall within the exemption of Section 122 of C.A. 466.
Held/Ratio
NO.
A state is a politically organized sovereign community independent of outside control
bound by ties of nationhood, legally supreme within its territory, acting through a
government functioning under a regime of law (Pound); 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 (Willoughby); a body-politic

organized by common consent for mutual defense and mutual safety and to promote the
general welfare (Cooley); the juridical personification of the nation, viewed in the light of
its historical development (Cohen); 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; a territorial
society divided into government and subjects, claiming within its allotted area a
supremacy over all other institutions (Laski); The power entrusted to its government to
maintain within its territory the conditions of a legal order and to enter into international
relations (McIver).
International law does not require independence as a condition of statehood (Hyde).
Hence, Tangier, Morocco, while a principality, can also be considered a state.
The court related the case of Tangier to that of the State of California, which lacked
international personality, being a part of a Union, but is still considered a foreign
country for purposes of Sec. 122 of C.A. 466.

BOBBY JOHNSON O. SEBASTIAN