Gross State (Residence and Citizenship) 2.

Tangible personal property, within and without

3. Intangible personal property, within and without
Citizens of the Philippines
In the case of a nonresident alien, the gross estate shall include
The following are considered citizens of the Philippines.
only the following;

1. Those who are citizens of the Philippines at the time of

1. Real property within
the adoption of this Constitution; 2. Tangible personal property within
2. Those whose fathers or mothers are citizens of the 3. Intangible personal property within, unless exempted

Philippines; under the principle of reciprocity

3. Those born before January 17, 1973 of Filipino mothers, The above rule is hereby summarized as follows:
who elect Philippine citizenship upon attaining the age of Nonresident Nonresident
Classification of Resident
majority; Alien (no Alien (with
Property or Citizen
4. Those who are naturalized in accordance with law. reciprocity) reciprocity)

Real Property:
Residence for estate tax purposes
Within Yes Yes Yes
The term “residence” does not necessarily mean the actual place
Without Yes No No
of residence. It refers to the permanent home, the place to which Personal Property:
whenever absent, for business or pleasure, one intends to return, Tangible within Yes Yes Yes

and depends on the fact and circumstances, in the sense that they Tangible
Yes No No
disclose intent. without
Intangible within Yes Yes No
Properties included in the gross estate
Intangible
Yes No No
without
The properties to be included in the gross estate will depend on
the citizenship and/or residence of the decedent.
Yes – the property is included in the gross estate of the decedent.

Filipino citizens are called “citizens”, while those who are not No – the property is not included in the gross estate of the

Filipino citizens are called “aliens”. decedent.

Rule on reciprocity
The value of the gross estate of a resident shall be determined by
Reciprocity is a mutual exchange of privileges; specifically : a
including the value at the time of his death of all property, real or
personal, tangible or intangible, wherever situated. Provided, recognition by one of two countries or institutions of the validity of

however, that in the case of a nonresident decedent who at the licenses or privileges granted by the other.

time of his death was not a citizen of the Philippines, only that part
of the entire gross estate which is situated in the Philippines shall The rule on reciprocity applies only to nonresident aliens,

be included in his taxable estate. particularly on mortis causa donations when the properties are
intangible personal which are located within the Philippines.

If the donor is a citizen or resident alien, the gross estate shall No estate tax shall be collected in respect of intangible personal

include the following properties: property in the following instances:

1. Real property within and without 1. If the decedent at that time of his death was a citizen
and resident of a foreign country which at the time of his
 death did not impose a transfer tax on intangible (1) Land, buildings, roads and constructions of all kinds
personal property of the citizens of the Philippines not adhered to the soil;
residing in that foreign country. (2) Trees, plants, and growing fruits, while they are
attached to the land or form an integral part of an
Illustration 4-1 immovable;
(3) Everything attached to an immovable in a fixed
Jack, a resident and citizen of “A” foreign country died manner, in such a way that it cannot be separated
leaving real properties to Jill which are located in that therefrom without breaking the material or deterioration of
country and shares of stocks of a domestic corporation in the object;
the Philippines. Will these properties be included in the (4) Statues, reliefs, paintings or other objects for use or
gross estate of Jack and therefore subject to estate tax in ornamentation, placed in buildings or on lands by the
the Philippines? owner of the immovable in such a manner that it reveals
the intention to attach them permanently to the
2. If the laws of the foreign country of which the decedent at tenements;
the time of his death allows a similar exemption from (5) Machinery, receptacles, instruments or implements
transfer taxes of every character or description in respect intended by the owner of the tenement for an industry or
of intangible personal property owned by citizens of the works which may be carried on in a building or on a
Philippines not residing in that foreign country. piece of land, and which tend directly to meet the needs
of the said industry or works;
Illustration 4-2 (6) Animal houses, pigeon-houses, beehives, fish ponds
or breeding places of similar nature, in case their owner
Philip, a resident and citizen of “A” foreign country died has placed them or preserves them with the intention to
leaving real properties to Pilar which are located in that have them permanently attached to the land, and forming
foreign country and shares of stock of a domestic a permanent part of it; the animals in these places are
corporation in the Philippines. At the time of his death, included;
his country imposes transfer taxes on donations of (7) Fertilizer actually used on a piece of land;
intangible personal properties located in that country. (8) Mines, quarries, and slag dumps, while the matter
However, that same tax law grants tax exemption on thereof forms part of the bed, and waters either running
intangibles owned by Filipinos therein. Will the transfer or stagnant;
be included in his gross gift of Philip and therefore (9) Docks and structures which, though floating, are
subject to estate tax in the Philippines? intended by their nature and object to remain at a fixed
place on a river, lake, or coast;
Real and personal properties
(10) Contracts for public works, and servitudes and other
Real properties are also known as “immovables” while the
real rights over immovable property.
personal properties are known as “movables”.

Personal or movable properties are those that are not real. In

The real properties are enumerated in Article 415 of the Civil Code
order to determine whether an object is movable or not, the
of the Philippines.
following tests must be applied in the successive order.

IMMOVABLE PROPERTY 1. Whether the object can be transported from place to

place.
Art. 415. The following are immovable property:
 2. Whether the change of location can take place without j. Franchise exercised in the Philippines 380,000
injury to the immovable to which it may be attached; k. Accounts receivable, debtor residing in
275,000
3. Whether it is not included in the enumeration found in the Philippines
Article 415 of the Civil Code. l. Accounts receivable, debtor residing in
240,000
New York
If the answers to the above questions are in the affirmative, the
m. Accounts receivable, debtor residing in
object is movable. 385,000
Hongkong
The predominant criterion, however, in the distinction of property
n. Investment in Lovers Co., partnership
into real and personal is the possibility of transfer of the latter or of 730,000
established in New York
its movement in space, whether by itself as in the case of animals,
o. Investment in Mahalia Co., partnership
or by some external acts. 300,000
established in the Philippines
Real or immovable property presupposes stability or the
p. Investment in Sing Kaw Kaw Co.,
impossibility of transfer from place to place. 245,000
partnership established in Hongkong
Intangible personal properties within
q. Domestic shares, certificate kept in the
140,000
Philippines
The following intangible personal properties are considered
r. Domestic shares, certificate kept in
situated within the Philippines: 250,000
New York City
1. Franchise which must be executed within the Philippines; s. Foreign shares, 90% of business in the
100,000
2. Shares, obligations or bonds issued by any corporation Philippines
or sociedad anonima organized or constituted in the t. Foreign shares, 30% of business in the
Philippines in accordance with its laws; Philippines, but acquired business 270,000
3. Shares, obligations or bonds issued by any foreign situs in the Philippines.
corporation eighty five per centum (85%) of the business u. Foreign shares, 60% of business in the
425,000
of which is located in the Philippines; Philippines
4. Shares, obligations or bonds issued by a foreign
Total 14,555,000
corporation if such shares, obligations or bonds have
acquired a business situs in the Philippines; and
Compute the gross estate if Dina Mathay is a:
5. Shares or rights in any partnerships, business or industry
established in the Philippines.
1. Resident or citizen

Illustration 4-3 2. Non-resident alien (no reciprocity)

Dina Mathay, a decedent, single, left the properties: 3. Non-resident alien (with reciprocity)

a. Vacation house in Hongkong P 1,200,00

b. Land in Zamboanga City 80,000
c. House in Daet, Camarines Norte 3,000,000
d. Apartment in New York, USA 4,500,000
e. Car in Hongkong 700,000
f. Car in the Philippines 650,000
g. Jewelries in New York, USA 125,000
h. Franchise exercised in New York 300,000
i. Franchise exercised in Hongkong 260,000