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A.

Payment of Estate Tax

Republic Act No. 8424 as amended by Republic Act No. 10963 provides
that Estate Tax shall be levied, assessed, collected and paid upon the transfer of
the net estate of every decedent, whether resident or nonresident of the
Philippines at the rate of six percent based on the value of such net estate. In
determining the amount of estate tax to be paid, 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. In the
case of a nonresident decedent who at the 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 be included in his taxable estate.1

As a rule, real properties owned by resident or nonresident alien which are


situated in the Philippines shall be included in the computation of the gross
estate and net estate.2

B. Determination of ownership of the property

In order to resolve, whether or not the subject property shall form part of
the gross estate of the resident or nonresident alien, it is imperative to determine
his or her title over the said property.

B.1 Prohibition on Foreign Ownership of Land in the Philippines

Aliens, as a general rule, are not allowed to own real property in the
Philippines. The prohibition on foreigners owning Philippine lands is embodied in
no less than the 1987 Philippine Constitution. The Constitution provides:

“Save in cases of hereditary succession, no private


lands shall be transferred or conveyed except to
individuals, corporations, or associations qualified to
acquire or hold lands of the public domain.” (Article
XII, Section 7)

It is clear from this provision that private land may be transferred only to
persons or entitles who/which has the capacity “to acquire or hold lands of the
public domain.”3 Those who are qualified to acquire or hold lands of the public
domain are as follows:

1. Filipino citizens;
2. Corporations at least 60% of the capital of which is owned by Filipinos.4

1
Section 85 of Republic Act No. 8424: Gross Estate. - 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 the case of a nonresident decedent who at the 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 be included in his taxable
estate.
2
Id.
3
Borromeo vs. Descallar, G.R. No. 159310, 24 February 2009
4
Section 22 of Commonweath Act no. 141: Any citizen of lawful age of the Philippines, and any such citizen not of lawful
age who is a head of a family, and any corporation or association of which at least sixty per centum of the capital stock or
of any interest in said capital stock belongs wholly to citizens of the Philippines, and which is organized and constituted
under the laws of Philippines, and corporate bodies organized in the Philippines authorized under their charters to do so;
may purchase any tract of public agricultural land disposable under this Act, not to exceed one hundred and forty-four
hectares in the case of an individual and one thousand and twenty-four hectares in that of a corporation or association, by
proceeding as prescribed in this chapter: Provided, That partnerships shall be entitled to purchase not to exceed one
In other words, the Constitution explicitly prohibits foreigners from
acquiring or holding title to private lands. A foreign individual or corporation may
only lease and not own Philippine land.5

B.2 Exception to the Prohibition on Foreigners Acquisition of Land in the


Philippines

The following are the exceptions to the rule that foreigners are prohibited
from acquiring real property in the Philippines:

1. Purchase by a former natural-born Filipino citizen subject to the limitations


prescribed by Batas Pambansa 185 and R.A. 8179 6
2. Acquisition before the 1935 Constitution
3. Acquisition through hereditary succession if the foreigner is a legal or
natural heir7

Jurisprudence also provides that a foreigner can legally own a house or


building in the Philippines as long as he or she does not own the land on which
the structure is built.8 When a foreigner is married to a Filipino citizen, and the
Filipino spouse dies, the non-Filipino as the natural heir will become the legal
owner of the property.9

B.3 Absolute Community Property or Conjugal Partnership of Gains

Article 75 of the Family Code provides that future spouses may, in the
marriage settlements, agree upon the regime of absolute community, conjugal
partnership of gains, complete separation of property, or any other regime. In the
absence of a marriage settlement, or when the regime agreed upon is void, the
system of absolute community of property shall govern.

Under the regime of absolute community of properties, the community


property shall consist of all the property owned by the spouses at the time of the
celebration of the marriage or acquired thereafter.10 On the other hand, all
property acquired during the marriage, whether the acquisition appears to have
been made, contracted or registered in the name of one or both spouses, is
presumed to be conjugal unless the contrary is proved under the conjugal
partnership regime . 11

However, the law pertaining to absolute community of properties and


conjugal partnership will not have the effect of conferring title or ownership of real
property to a foreigner, married to a Filipino citizen. The Constitution, which is

hundred and forty-four hectares for each member thereof. but the total area so purchased shall in no case exceed the one
thousand and twenty-four hectares authorized in this section for associations and corporations.
5
Art XII, Sec. 3 of the 1987 Constitution: Private corporations or associations may not hold such alienable lands of the
public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five
years, and not to exceed one thousand hectares in area. Citizens of the Philippines may lease not more than five hundred
hectares, or acquire not more than twelve hectares thereof, by purchase, homestead, or grant.
6
Art. XII, Sec. 8 of the 1987 Philippine Constitution: Notwithstanding the provisions of Section 7 of this Article, a natural-
born citizen of the Philippines who has lost his Philippine citizenship may be a transferee of private lands, subject to
limitations provided by law.
7
Art. XII, Sec. 7 of the 1987 Philippine Constitution: Save in cases of hereditary succession, no private lands shall be
transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public
domain.”
8
Willem Beumer vs. Avelina Amores, G.R. No. 195670, December 3, 2012
9
International Business Inc., “Philippine Laws and Regulations”, 2017. Accessed online at:
https://books.google.com.ph/books?id=XGnxCQAAQBAJ&pg
10
Article 91 of the Family Code
11
Article 116 of the Family Code
considered as the highest law of the land will still govern. Considering that the
Constitution expressly prohibits foreigners from acquiring real properties in the
Philippines, any real property acquired during the subsistence of the marriage
between a foreigner and a Filipino will still not be considered as part of their
property regime as husband and wife. Therefore, the presumption of absolute
community of property or conjugality over the said real properties will not apply.

Conclusion

A real property registered under the name of a Filipino, who is married to a


foreigner who may be a resident or nonresident of the Philippines, will not be
included in the determination of the gross estate of the foreigner which is
necessary in computing the estate tax due.

Under the Philippine Constitution, foreigners are not allowed to own real
properties in the Philippines save in cases of hereditary succession, purchase by
a former natural-born Filipino citizen subject to the limitations prescribed by law
and acquisition of land before the 1935 Constitution. In the present case, the
Dutch national who is married to a Filipino citizen does not fall under the above
stated exceptions. Therefore, the real property located in Pulu Amsic Angeles
City is not owned by him and is not subject to estate tax.

Although the subject property was acquired during the marriage of the
Dutch national and the Filipino citizen, it cannot form part of the absolute or
community property of the spouses for it will run afoul to the dictates of the
Constitution. Jurisprudence provides that the words "married to" preceding the
name of a spouse as shown in the Transfer Certificate of Title are merely
descriptive of the civil status of the registered owner.12 Such words do not prove
co-ownership.

At most, the foreigner is allowed to own the house or building erected in


the land registered under the name of his or her Filipino spouse. In the present
case, the Transfer Certificate of Title and the Tax Declaration reveal that the land
as well as its improvements is owned by the Filipino spouse. Therefore, the
house which is built on the land owned by the Filipino spouse cannot be subject
to estate tax since the foreigner spouse does not own it.

12
Bangayan vs. Bangayan, Jr., G.R. No. 201061, July 3, 2013