FACTS:

Respondent Antonio Campos Rueda is an administrator of the estate of the late Estrella Soriano
Vda. De Cerdeira 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.

Respondent Campos Rueda file a provisional estate and inheritance tax return on all the
properties of the late Maria Cerdeira. On the same date, respondent, pending investigation,
issued an assessment for estate and inheritance taxes in the respective amounts of P111,592.48
and P157,791.48, or a total of P369,383.96 which tax liabilities were paid by petitioner. 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 of the National Internal Revenue Code.

The matter was then elevated to the Court of Tax Appeals which ruled in favor of the respondent.
The principal question as noted dealt with the reciprocity aspect as well as the insistence by the
Collector of Internal Revenue that Tangier was not a foreign country within the meaning of
Section 122.

ISSUE: Whether or not Tangier is a state.

HELD:

YES. 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 ties of nationhood, legally supreme within its territory, acting through a government
functioning under a regime of law. It 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 its commands. It has been referred to as a body-politic organized by common
consent for mutual defense and mutual safety and to promote the general welfare

Further, the Supreme Court noted that there is already an existing jurisprudence (Collector vs De
Lara) which provides that even a tiny principality, that of Liechtenstein, hardly an international
personality in the sense, did fall under the exempt category provided for in Section 22 of the Tax
Code. Thus, recognition is not necessary. Hence, since it was proven that Tangier provides such
exemption to personal properties of Filipinos found therein so must the Philippines honor the
exemption as provided for by our tax law with respect to the doctrine of reciprocity.
Collector of Internal Revenue vs Campos Rueda case digest
(42 SCRA 23 Political Law definition of “state”)

In January 1955, Maria Cerdeira died in Tangier, Morocco (an international zone [foreign
country] in North Africa). At the time of her death, she was a Spanish citizen and was a
resident of Tangier. She however left some personal properties (shares of stocks and other
intangibles) in the Philippines. The designated administrator of her estate here is Antonio
Campos Rueda.
In the same year, the Collector of Internal Revenue (CIR) assessed the estate for
deficiency tax amounting to about P161k. Campos Rueda refused to pay the assessed tax
as he
claimed that the estate is exempt from the payment of said taxes pursuant to section
122 of the Tax Code
which provides:
Campos Rueda was able to prove that there is reciprocity between Tangier and the
Philippines.
However, the CIR still denied any tax exemption in favor of the estate as it averred that
Tangier is not a “state” as contemplated by Section 22 of the Tax Code and that the
Philippines does not recognize Tangier as a foreign country.

ISSUE:
Whether or not
Tangier is a state.

HELD:
Yes. For purposes of the Tax Code, Tangier is a foreign country.
A foreign country to be identified as a state must 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.
The stress is on its being 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.
Further, the Supreme Court noted that there is already an existing jurisprudence
(Collector vs De Lara)which provides thateven a tiny principality, that of
Liechtenstein, hardly an international personality in the sense, did fall under the exempt
category provided for in Section 22 of the Tax Code.
Thus, recognition is not necessary. Hence, since it was proven that Tangier provides such
exemption to personal properties of Filipinos found therein so must the Philippines honor the
exemption as provided for by our tax law with respect to the doctrine of reciprocity.

In international relations and treaties, the principle of reciprocity states that favors, benefits, or penalties
that are granted by one state to the citizens or legal entities of another, should be returned in kind