Basis of Estate and Inheritance Taxes of Chinese Citizens who Resided and Acquired Properties in the Philippines

November 14, 1968 BIR RULING NO. 035-68 Atty. Job. M. Cabangon Telengtan Building Km. 14 South Super Highway Paraaque, Rizal S i r : This refers to your letter dated February 28, 1968 requesting information on the basis of the estate and inheritance taxes under the following facts: "Husband and wife who are both Chinese citizens acquired real properties in the Philippines during their lifetime. "Under our civil code, such properties are conjugal in nature and they belonged to both husband and wife. However, under the laws of China, such properties belong only to the husband, because the wife is not allowed to own real properties. "When the husband died, the Bureau of Internal Revenue, on one occasion, assessed the estate and inheritance tax on the whole instead of only one half of the properties, under the theory that the whole properties belonged to the husband under the laws of China. "Please inform me whether the assessment of estate and inheritance taxes are based on the whole or only on one-half of the properties acquired during the marriage of Chinese husband and wife residing in the Philippines." In reply thereto, I have the honor to inform you that for estate and inheritance tax purposes, the property relationship of the deceased spouses who are both Chinese citizens but residents of the Philippines at the time of their death, leaving real properties allegedly situated in this country and which were acquired by the said spouses during their marriage, as well as the order succession, both testate and intestate, amount of successional rights and the intrinsic validity of testamentary provisions shall be governed by the law of China pursuant to Arts. 16 and 124, New Civil Code, which are quoted below, viz.: "Art. 16. Real property as well as personal property is subject to the law of the country where it is situated. "However, intestate and testamentary successions, both with respect to the order of succession and to the amount of successional rights and to the intrinsic validity of testamentary provisions, shall be regulated by the national law of the person whose succession is under consideration, whatever may be the nature of the property and regardless of the country wherein said property may be found. "Art. 124. If the marriage is between a citizen of the Philippines and a foreigner, whether celebrated in the Philippines or abroad, the following rules shall prevail: (1) If the husband is a citizen of the Philippines while the wife is a foreigner, the provisions of this Code shall govern their property relations; (2) If the husband is a foreigner and the wife is a citizen of the Philippines, the laws of the husband's country shall be followed, without prejudice to the provisions of this Code with regard to immovable property." Accordingly, the question of whether or not the Philippine estate and inheritance taxes would be assessed and/or computed on the whole or on one-half only of the properties acquired during the marriage of the Chinese couple adverted to in your query should be resolved in accordance with the law of China on the matter, which for this purpose, must be pleaded and proved; otherwise, it will be presumed that the law prevailing in the foreign country is the same as that which prevails in this jurisdiction. (International Harvester Co. vs. Hamburg-American Line, 42 Phil. 845, Yam Ka Lim vs. Collector of Customs, 30, Phil. 46) cdtech Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue