Is a Nonresident Alien's Estate Taxed in the Philippines? Situs Rules and the Section 104 Reciprocity Exemption

A nonresident alien decedent’s Philippine estate tax exposure is narrower than a resident’s: under NIRC Section 104, only property situated in the Philippines enters the taxable gross estate — Philippine real property, tangible personal property physically located here, and shares or bonds issued by a domestic corporation. Certain intangible personal property may also be exempt under Section 104’s reciprocity rule, but only with proof of the specific foreign country’s law.

What is a nonresident alien decedent for Philippine estate tax purposes? #

A nonresident alien decedent is a foreign citizen who, at the time of death, was neither a Philippine citizen nor a resident of the Philippines. Philippine estate tax law treats this group differently from citizens and resident aliens by taxing only the portion of the estate that has a Philippine situs, not worldwide property.

Philippine estate tax applies to three categories of decedents, each with a different scope of taxable estate:

• Resident citizens and resident aliens — taxed on their entire estate, wherever the property is located worldwide
• Nonresident citizens — also taxed on worldwide property, because Philippine citizenship, not residence, is the trigger
• Nonresident aliens — taxed only on property situated in the Philippines under NIRC Section 104

This last category is the subject of this post: a foreign national, not a Philippine citizen, who was not residing in the Philippines when they died, but who left behind property here — a condominium unit, a bank deposit, or shares in a Philippine company are common examples.

What does NIRC Section 104 include in a nonresident alien’s Philippine gross estate? #

NIRC Section 104 defines “gross estate” to include real and personal property, tangible or intangible, wherever situated — but then carves out a nonresident alien’s foreign-situated property from that definition entirely. What remains taxable is limited to specific categories of Philippine-situated property that Section 104 spells out.

Section 104 states the general rule for nonresident aliens directly. In relevant part, it reads:

“For purposes of this Title, the terms ‘gross estate’ and ‘gifts’ include real and personal property, whether tangible or intangible, or mixed, wherever situated: Provided, however, That where the decedent or donor was a nonresident alien at the time of his death or donation, as the case may be, his real and personal property so transferred but which are situated outside the Philippines shall not be included as part of his ‘gross estate’ or ‘gross gift’.”

Following that carve-out, Section 104 then treats certain kinds of intangible personal property as situated in the Philippines regardless of where the underlying certificate or document is physically kept — most notably shares, obligations, or bonds issued by a domestic corporation, and franchises exercised in the Philippines. This “deemed situs” rule is what pulls Philippine domestic-corporation shares into a nonresident alien’s gross estate even when the stock certificate never left the decedent’s home country.

Included in a nonresident alien’s Philippine gross estate:

• Real property physically located in the Philippines
• Tangible personal property (vehicles, jewelry, furniture) physically located in the Philippines at the time of death
• Shares, obligations, or bonds issued by a domestic corporation, deemed Philippine-situated under Section 104 regardless of certificate location
• Franchises that must be exercised in the Philippines
• Shares, obligations, or bonds of a foreign corporation, if 85% or more of that corporation’s business is located in the Philippines

What is the Section 104 reciprocity exemption for intangible personal property? #

Section 104 also contains a reciprocity rule that can exempt a nonresident alien’s Philippine-situated intangible personal property from Philippine estate tax, but it applies narrowly and depends entirely on the tax law of the decedent’s own country — it does not exempt real property or tangible personal property, and it is not automatic.

The reciprocity rule works in either of two directions, and satisfying just one is enough to support the exemption:

1. No tax imposed by the foreign country — the country of which the decedent was a citizen and resident, at the time of death, did not impose a transfer or estate tax of any character on intangible personal property owned by Philippine citizens who were not residing in that country; or
2. A similar exemption allowed by the foreign country — that country’s own laws allow a similar exemption from transfer or death taxes on intangible personal property owned by Philippine citizens not residing there.

Either branch, standing alone, can support the exemption — the estate does not need to prove both. In practice, though, both branches require the same kind of evidence: documentation of the foreign country’s actual tax statute in force at the time of the decedent’s death, not a general impression that the country “probably” has no estate tax.

Where reciprocity does and does not apply:

A worked, hypothetical example #

The following example is entirely illustrative — the country and its tax law are hypothetical, and the purpose is to show how the situs and reciprocity rules interact, not to state that any specific real country qualifies.

Assume a nonresident alien decedent, a citizen and resident of “Country X” who never resided in the Philippines, dies owning two Philippine assets: a Manila condominium unit worth ₱6,000,000, and shares in a Philippine domestic corporation worth ₱3,000,000. Under Section 104, both assets fall within the Philippine gross estate: the condominium as Philippine-situated real property, and the shares as intangible property deemed Philippine-situated because they were issued by a domestic corporation. Reciprocity is not available for the condominium, because reciprocity applies only to intangible personal property. Whether reciprocity could exempt the domestic-corporation shares specifically is a harder question — Section 104’s deemed-situs clause for domestic shares and its reciprocity clause interact in ways that depend on the specific facts and on Country X’s actual estate-tax statute, so this hypothetical does not resolve it either way. If the estate also held, say, a receivable from a Philippine debtor unrelated to any domestic corporation’s shares, and Country X’s law imposed no estate tax on intangible property owned by Philippine citizens not residing in Country X, that receivable could potentially qualify for the reciprocity exemption — subject to the estate producing proof of Country X’s law. A ₱500,000 standard deduction would apply to this nonresident alien’s estate regardless of how the reciprocity question resolves, smaller than the ₱5,000,000 standard deduction available to a resident or citizen decedent’s estate.

Because reciprocity turns on foreign law that changes over time and varies by country, an estate should not assume a given country qualifies without professional verification — a wrong assumption here does not just misstate a deduction, it can mean an entire asset class was left off (or wrongly excluded from) BIR Form 1801.

How does this affect filing BIR Form 1801? #

A nonresident alien’s estate still files BIR Form 1801 through the same process as any other estate, but the inventory step is where the situs and reciprocity analysis actually matters — get it wrong here and the return misstates the gross estate before any deduction is even applied.

1. Identify every asset the decedent owned and classify each one as Philippine-situated or foreign-situated under Section 104
2. For Philippine-situated intangible personal property other than domestic-corporation shares, determine whether the reciprocity exemption applies and gather proof of the relevant foreign country’s law
3. Compute the gross estate using only the Philippine-situated (and non-exempt) property
4. Apply the ₱500,000 standard deduction, along with any other deductions the estate can substantiate
5. File BIR Form 1801 and pay the flat 6% estate tax on the resulting net estate within one year of death

See BIR Form 1801: Estate Tax Return Requirements and Deadlines for the full filing sequence, TIN requirements, and deadline rules that apply to every estate regardless of the decedent’s residency status, and Estate Tax Standard Deduction and Family Home Deduction Under the TRAIN Law for how the standard deduction and family home deduction work for citizen and resident estates by comparison.

Frequently asked questions #

Is the estate of a nonresident alien who died owning Philippine property subject to Philippine estate tax? #

Yes, but only on the portion of the estate situated in the Philippines. Under NIRC Section 104, a nonresident alien decedent’s Philippine gross estate includes real property located in the Philippines, tangible personal property physically located in the Philippines, and shares, obligations, or bonds issued by a domestic corporation, which are deemed Philippine-situated regardless of where the certificates are kept. Property the decedent owned outside the Philippines is excluded from the Philippine gross estate entirely.

What is the Section 104 reciprocity rule? #

The reciprocity rule under NIRC Section 104 can exempt intangible personal property with a Philippine situs from Philippine estate tax if the nonresident alien decedent’s home country either imposed no transfer or estate tax of any character on intangible personal property owned by Philippine citizens not residing there, or allowed a similar exemption to intangible property owned by Philippine citizens not residing there. Either condition, on its own, can support the exemption.

Are shares in a Philippine domestic corporation covered by the reciprocity exemption? #

Generally no. NIRC Section 104 specifically deems shares, obligations, or bonds issued by a domestic corporation as property situated in the Philippines and includes them in the nonresident alien’s gross estate as a matter of situs, separate from the reciprocity analysis that applies to other intangible personal property. Reciprocity is a fact-specific question and how it interacts with domestic shares should be confirmed with a tax professional for a real estate.

How much can a nonresident alien’s estate deduct before Philippine estate tax applies? #

A nonresident alien’s estate is entitled to a standard deduction of ₱500,000, deductible without needing to prove actual funeral or administration expenses. This is smaller than the ₱5,000,000 standard deduction available to a citizen or resident decedent’s estate, reflecting that only the Philippine-situated portion of a nonresident alien’s estate is taxed in the first place.

What proof does an estate need to claim the Section 104 reciprocity exemption? #

An estate claiming reciprocity generally needs competent proof of the specific foreign country’s tax law at the time of the decedent’s death — such as a certified copy or authenticated text of that country’s statute, or a legal opinion confirming it imposed no transfer tax on Philippine citizens’ intangible property, or that it granted a similar exemption. Because this proof is fact-and-foreign-law specific, estates should verify the claim with a tax professional before relying on it, rather than assuming a given country qualifies.

Summary #

A nonresident alien decedent’s Philippine gross estate under NIRC Section 104 is limited to Philippine-situated property: real property located here, tangible personal property physically here, and shares, obligations, or bonds issued by a domestic corporation, which are deemed Philippine-situated regardless of where the certificate is kept. Section 104’s reciprocity rule can exempt other Philippine-situated intangible personal property from Philippine estate tax if the decedent’s home country either imposed no transfer tax on Philippine citizens’ intangible property or granted a similar exemption — but claiming it requires actual proof of that country’s law, not an assumption. A nonresident alien’s estate also gets a smaller ₱500,000 standard deduction rather than the ₱5,000,000 available to resident and citizen decedents. Because situs classification and reciprocity both turn on specific facts and foreign law, an estate with a nonresident alien decedent should verify both questions with a tax professional before filing BIR Form 1801.