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If you’re moving abroad, you may wonder what the difference is between your domicile and your residence. They sound similar, but they have large differences. Understanding the differences is important for immigration paperwork as well as tax filings and other legal proceedings.
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What Is Domicile?
Your domicile is the country where you live or have a home and spend most of the year. You don’t have to be living there currently, but it’s the place you call home and the place you’ll return to when you’re done traveling.
Think of it this way, when you’re born, your domicile is where your parents live. When you’re an adult, your domicile is where you choose to live full-time. Sometimes even if you move abroad, your domicile remains the same. It’s important to determine the right domicile for yourself for tax and legal purposes.
Why Is a Domicile Important?
As we discussed above, your domicile is important for tax filing purposes. Your domicile is where you file taxes, but you may also be required to file taxes abroad if you’ve conducted business in other countries.
Your domicile affects how and where you file income taxes - taxes on the money you earn by working or investing. You’ll also pay taxes on capital gains earned on your investments and tax on any inheritance. Your country of domicile determines how you are taxed.
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What Is Residency?
If you reside in a country for over 183 days per year, you are a resident. Your residency is typically more temporary than your domicile. When you have residency in a country, you have the right to live and work there, but it still may not be your country of domicile.
Can You Change Your Domicile?
You may be able to change your domicile after the age of 18, but it’s not easy to do. First, you must prove you intend to live in the other country permanently or at least for the foreseeable future. This shouldn’t be a temporary change, but something of a more permanent nature.
If you plan to conduct all business in the new country and change overall documentation, including your driver’s license, voting registration, and legal documents, you may be able to prove you’ve changed domicile.
What if You Live In Two Homes?
Many people live in two homes throughout the year. Whether you split the time 50/50 or some other way, you still have a country of domicile and residency.
The country of domicile is the country you call home. It’s the place you return for most normal activities. If you live in two places, your country of domicile may also be your country of residence because you live there temporarily.
The other country you live in during other parts of the year will be your country of residence. Even if you conduct some business there, it’s a temporary place. You haven’t abandoned your original country (domicile country) nor your residence country (the country you live for part of the year).
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The Legal Jargon
Besides taxes, your legal documents are also important and are always drawn in your country of domicile. Common examples include wills and trusts, where you vote, or where you register your vehicles.
Your legal domicile has control over many of your legal decisions, including distributing your estate or handling your divorce. As we spoke about above, they also control your taxes, even if you owe taxes in a country of residency too.
Country of Domicile FAQ
Can a Person Have Two Domiciles?
No, you may only have one domicile. While you can live in more than one country throughout the year, you have one country that oversees all aspects of your life.
Why Is Domicile Important?
Your domicile is who handles your death taxes, income taxes has jurisdiction over you, and who will make important legal decisions. It’s who you’d go to when you have any legal issues or questions.
How Do You Establish a Domicile?
To change your domicile and establish yourself, you’ll need to change your identification, show proof of how long you’ve lived in the new area, register to vote in the new area, and set up ‘home’ by opening bank accounts and showing other signs of staying there permanently.
Can You Be Without a Domicile?
No one should be without a domicile. You’re assigned a domicile when you’re born based on where your parents live. If you don’t change domicile once you reach majority age, your domicile remains the same.
The Bottom Line
Pay close attention to your country of domicile. Make sure you’re registered in the country you spend your time in and that you call home. Even if you travel or own multiple homes, you have one country that oversees your tax and legal obligations. This is the country that handles the important parts of your life. If you plan to change domiciles, work with the appropriate government entity to see if you’re approved to do so.