Residency and Domicile

 

Residency and Domicile are distinct concepts, particularly crucial for taxation purposes.

Residency

Residency refers to the status of being a resident in a particular country for tax purposes. It’s possible for individuals to be residents in multiple countries simultaneously, known as dual residency. Double taxation agreements help prevent individuals from being taxed twice on the same income in such cases.

Statutory Residency Test (SRT)

The Statutory Residency Test (SRT), implemented since April 6th, 2013, comprises various criteria determining residency status, including the number of days spent in the UK and ties to the country.

Domicile

On the other hand, domicile signifies a person’s permanent home or significant connection with a specific country. Initially determined at birth, a domicile of origin is typically inherited from one’s parents. One can only hold one domicile at a time.

The relevance of domicile often lies in the context of foreign income and gains during a tax year, influencing potential tax liabilities. For individuals without foreign income or gains, domicile status typically doesn’t affect their UK tax position.

There exist three types of domicile:

    1.  Domicile of Origin: Assigned automatically at birth, typically inherited from one’s parents.
    2.  Domicile of Choice: Acquired by legally severing ties with one’s current domicile and establishing permanent residency elsewhere.
    3.  Domicile of Dependence: Follows the domicile of the person upon whom one is legally dependent until the individual gains the legal capacity to change it.

Changes in domicile status can occur through various life events and legal processes, such as marriage or reaching the legal age to choose a new domicile.

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