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Chapter XVII: Situs of Estate and Donors

Tax
Sec. 104. Definitions - For purposes of this
Title, the terms 'gross estate' and 'gifts'
include real and personal property, whether
tangible or intangible, or mixed, wherever
situated:
Provided, however, That where the decedent or
donor was a nonresident alien at the time of
his death or donation, as the case may be, his
real and personal property so transferred but
which are situated outside the Philippines shall
not be included as part of his 'gross estate' or
'gross gift':
Provided, further,
(1) That franchise which must be exercised
in the Philippines;
(2) Shares, obligations or bonds (SOB)
issued by any corporation or sociedad
anonima organized or constituted in
the Philippines in accordance with its
laws;
(3) Shares, obligations or bonds by any
foreign corporation eighty-five percent
(85%) of the business of which is
located in the Philippines;
(4) Shares, obligations or bonds issued by
any foreign corporation if such shares,
obligations or bonds have acquired a
business situs in the Philippines;
(5) Shares or rights in any partnership,
business or industry established in the
Philippines, shall be considered as
situated in the Philippines:
Provided, still 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
or the donor at the time of the
donation was a citizen and resident of
a foreign country which at the time of
his death or donation did not impose a
transfer tax of any character, in respect

of intangible personal property of


citizens of the Philippines not residing
in that foreign country, or
(b) If the laws of the foreign country of
which the decedent or donor was a
citizen and resident at the time of his
death or donation allows a similar
exemption from transfer or death taxes
of every character or description in
respect of intangible personal property
owned by citizens of the Philippines not
residing in that foreign country.
The term 'deficiency' means:
(a) The amount by which tax imposed by
this Chapter exceeds the amount
shown as the tax by the donor upon his
return; but the amount so shown on
the return shall first be increased by
the amount previously assessed (or
Collected without assessment) as a
deficiency, and decreased by the
amounts previously abated, refunded
or otherwise repaid in respect of such
tax, or
(b) If no amount is shown as the tax by the
donor, then the amount by which the
tax exceeds the amounts previously
assessed, (or collected without
assessment) as a deficiency, but such
amounts previously assessed, or
collected without assessment, shall
first be decreased by the amount
previously abated, refunded or
otherwise repaid in respect of such tax.
Taxpayers under the estate tax:
1.
2.
3.
4.

Resident Citizen (RC)


Nonresident Citizen (NRC)
Resident Alien (RA)
Nonresident Alien (NRA)

Taxpayers under the donors tax


1.
2.
3.

Resident Citizen (RC)


Nonresident Citizen (NRC)
Resident Alien (RA)

4.
5.
6.

Nonresident Alien (NRA)


Domestic Corporation (DC)
Foreign Corporation (FC)

Q: Corporations are subject to donors tax


but NOT estate tax. Why?
A: A corporation is not a taxpayer under estate
tax because it is incapable of death, however,
it is subject to donors tax since it is a juridical
person who can enter into contract of
donations, thus may be subject to donors tax.
Taxpayers liable for property within ONLY:
1.
2.

NRA
FC

Implication: Situs of the property is material


Intangible Properties deemed located in the
Philippines:

See Sec. 104, Provided, further


The enumeration in provided further is
relevant to NRA and FC ONLY

GR: The enumeration of intangible properties


located in the Philippines as provided in Sec.
104 is relevant only to NRA and FC. Hence,
these properties may be subject to tax.
XPN: Even if NRA and FC owns intangible
properties located in the Philippines, they are
still not liable if the circumstances in Sec. 104,
provided, still further, are present. Hence, they
are exempt from estate or donors tax as the
case may be.
Campos Rueda v. Collector. It was held that
being a country or not is immaterial. What is
controlling is that the laws of Morocco allow
exemption from transfer taxes with respect to
intangible personal properties owned by
Filipinos in Morocco, hence, the requirement to
be exempt is satisfied, regardless of Morocco
not being a country.