Gross Estate

Under Section 85 of the Tax Code, the value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated.  Provided, however, that in case of a non-resident decedent who at the time of his death was not a citizen of the Philippines, only that part of the entire gross estate situated in the Philippines shall be included in his taxable estate.  Hence, the composition of the estate tax may be summarized as follows:

§  For Resident Citizen, Nonresident Citizen and Resident alien decedents, Gross Estate should include:

1)      Real property wherever situated

2)      Tangible personal property wherever situated

3)      Intangible personal property wherever situated

§  For Nonresident alien decedents, Gross Estate should include:

1)      Real property situated in the Philippines

2)      Tangible personal property situated in the Philippines

3)      Intangible personal property with situs in the Philippines, unless exempted on the basis of reciprocity.

The Reciprocity Rule

Section 104 of the Tax Code provides that “Intangible” Personal Properties with Situs in the Philippines of Non-Resident Alien Decedent shall be Exempt from Taxation if:

§  the decedent at the time of his death was a resident citizen of a foreign country which at the time of his death did not impose an estate tax of any character in respect of intangible personal property of citizens of the Philippines not residing in that foreign country; or

§  the laws of the foreign country of which the decedent was a resident citizen at the time of his death allow a similar exemption from estate taxes of every character, in respect of intangible personal property owned by citizens of the Philippines not residing in that foreign country.

Intangibles with Situs in the Philippines

The following are Intangible Personal Properties with Situs in the Philippines

2.       Franchise which must be exercised in the Philippines; 3.       Shares, obligations or bonds issued by any corporation or sociedad anonima organized or constituted in the Philippines in accordance with its laws; 4.       Shares, obligations or bonds issued by any foreign corporation 85% of the business of which is located in the Philippines; 5.       Shares, obligations, or bonds issued by any foreign corporation if such shares, obligations or bonds have acquired a business situs in the Philippines; and 6.       Shares or rights in any partnership, business or industry established in the Philippines.

v  As a rule, the situs of intangible personal property is the domicile of the owner.  However, such rule is not applicable if the intangible property has situs elsewhere.

Examples of INTANGIBLE personal property for estate tax purposes:

a.	Deposits in banks	e.	Trademark
b.	Investment in shares of stocks	f.	Copyright
c.	Investment in bonds	g.	Patent
d.	Accounts receivable