Definition
Domicile refers to the country or place where an individual has their permanent home and principal establishment, and to where, whenever they are absent, they intend to return. It is a critical concept in various legal and tax contexts, particularly in determining a person’s civil status and tax liability. It differs from one’s nationality or place of residence and involves both a physical presence and an intention to permanently remain in that location.
Key Points:
- Domicile of Origin: The domicile a person automatically gains at birth.
- Domicile of Choice: The domicile a person can adopt if they move to a new location with the intention of making it their permanent home.
- Corporate Domicile: Refers to the location where a corporation is legally registered or conducts the majority of its business activities.
- Banking Usage: In banking, an account is said to be domiciled at a particular branch, although modern technology allows flexibility in branch usage.
Examples
- Individual Domicile: A US citizen moves to France for work, purchases a home, and declares an intent to live there permanently. Legally severing ties with the US, they change their domicile to France.
- Corporate Domicile: A multinational company registered in the UK but operates primarily in Germany keeps its domicile in the UK for legal and tax purposes.
- Banking Domicile: A customer opens an account at a New York branch but often accesses services at branches in California due to modern banking technology.
Frequently Asked Questions (FAQs)
What factors determine a person’s domicile?
A person’s domicile is determined by their physical presence in a location and their intention to make it their permanent home. This can involve legal actions such as registering to vote, purchasing property, or changing legal documents to reflect the domicile.
Can a person have more than one domicile at the same time?
No, a person can have only one domicile at a time. Although they can have multiple residences, they can be domiciled only in one jurisdiction where they intend to make their permanent home.
How does domicile affect tax liability?
Domicile affects tax liability by determining which country’s tax laws apply to an individual. For example, a person domiciled in the UK may be subject to UK taxes on their worldwide income, whereas non-domiciled individuals may have different tax treatments.
How can a corporation change its domicile?
A corporation may change its domicile by re-registering in a new jurisdiction according to that jurisdiction’s laws and regulations. This may involve filing for new business licenses, adhering to local business laws, and possibly restructuring its operations.
What is the difference between domicile and residence?
Residence refers to a place where a person lives temporarily, while domicile is the place they consider their permanent home. Domicile involves an intention to remain indefinitely, whereas residence is more temporary and transient.
Related Terms
- Residence: The physical location where an individual lives temporarily.
- Nationality: The legal relationship between an individual and a country, often granting certain rights and obligations.
- Non-Domiciled Status: A status allowing individuals to reside in a country without being subject to its worldwide tax system.
- Moveable Domicile: The possibility for individuals to change their domicile by moving to a new place and intending to make it their permanent home.
Online References
- Investopedia: Definition of Domicile
- HMRC UK: Non-Resident Status
- IRS: U.S. Citizens and Resident Aliens Abroad
Suggested Books for Further Studies
- International Taxation in a Nutshell by Richard L. Doernberg
- Understanding Corporate Taxation by Leandra Lederman
- Tax Havens: How Globalization Really Works by Ronen Palan, Richard Murphy, and Christian Chavagneux
Accounting Basics: Domicile Fundamentals Quiz
Thank you for exploring the comprehensive concept of domicile in accounting. Keep working on solidifying your financial acumen!