Domicile
Domicile is a place, where a person resides permanently or most of his time. The intention to stay in some place indefinitely defines this place as a domicile. The address which an individual declares in legal documents to pay taxes, receive social security, vote, bank, and register vehicles and animals is defined as domicile.
Domicile definition
As a rule, the parental home is considered to be the first domicile for a person and continues to be so until reaching the age of majority, after which an independent choice of a domicile follows. Further, this domicile can be changed again, for example, when moving to another city or state in which an individual finds his new permanent home.
Even though hypothetically, a person can own multiple properties, only one of them is considered a domicile. It is the place where a person permanently resides, goes to work, makes bank payments, participates in elections and registers real estate and his cars.
However, the terms “residence” and “domicile” should not be confused, as they have different legal significance.
Distinctions between residence and Domicile
Quite often, the terms "residence" and "domicile" are used equally to refer to a person's home. Nevertheless, the concepts differ from each other and have distinct legal definitions. The length of time a person plans to live in a particular place is the main criterion by which these definitions differ.
A residence is considered to be a certain spot, the place where an individual stays for a limited period of time, while a domicile is a house where a person resides indefinitely in time.
Residence can be any of the places where, for example, a person’s property is located and where he dwells for a specific time span. Accordingly, a person can have many places of residence, while the domicile will always be permanent and the only one.
A domicile is the place, which is situated in the state where a person pays income tax, it is his legal location and permanent home. The domicile is always the residence, but the residence may not be the domicile in all cases.
Domicile example
The intended domicile of a person can be inferred from the place he mainly lives and spends time. But in some cases, people prefer to have two homes.
For instance, after thirty years of living in Texas on a permanent basis and spending vacations in Florida, an individual decides to live equally in these two states for half a year. He registers his taxes and makes his will in Texas, but he votes and has registered his car in Florida. Moving to Florida does not mean that Texas will be gone forever, as the division of activities between the two states indicates.
Accordingly, in this example, Texas is both a residence and a domicile, while Florida is his residence, but not his domicile.
Domicile and taxation
From a legal point of view, a person’s domicile is the address used in legal documents, the one that is given when visiting various official institutions, participating in elections, and paying taxes.
A non-resident is an individual who does not domicile in a given location, but has other interests or sometimes even business in it. If a person relocates and changes his domicile, he closes or updates current bank accounts, removes the name from voting rolls, and pays taxes as a non-resident.
The domicile of a person entails legal implications. It refers to the state and court that have jurisdiction to probate wills, operate property, adjudicate legal claims, and calculate income and other taxes. In the event of a divorce, the legal domicile may affect the ability to claim alimony. The domicile is also important in deciding how a citizen's personal property will be passed on after death, since the amount of inheritance tax and other estate taxes may significantly differ depending on the countries and states.
Determining a person’s domicile is also essential for tax purposes. For taxpayers with high incomes, it is more profitable to live in a state or a country that has a low tax liability. The domicile country has a right to tax all of your income, regardless of where it was earned. It should be noted that the country in which a person is a resident may also tax his worldwide income. Thus, if he has more than one residence or owns real estate or financial assets in foreign jurisdictions, all or any of the countries may also require taxation of his worldwide income.
Changing Domicile
There are two main stages of a domicile changing: establishing a new domicile and severing the connection to the old one.
If an individual wants to change the place in which he is domiciled, an intention should be demonstrated by him to make a new place of residence his permanent home.
The key is establishing enough evidence to demonstrate it, which can be accomplished by spending as much time as possible in the new place of domicile, changing addresses on all accounts and legal documents, bills and services to the new address, and taking the steps to integrate oneself into the new community as much as possible (for example, join clubs in the new place).
Many states offer their residents property tax benefits, for example, an annual tax credit. An individual should also give up any in-state resident benefits in the prior place. It is important to notify the local taxing authorities (in both the former place and the new one) of changing in residence status.
In addition to this, a person should obtain a driver’s license in his new place and change the registration of the automobile to his new location. He also should change his voter’s registration.
