Document Number
94-353
Tax Type
Individual Income Tax
Description
Residency; Foreign employment
Topic
Taxpayers' Remedies
Date Issued
11-23-1994
November 23, 1994



Re: §58.1-1821 Application: Individual Income Tax


Dear***********

This will reply to your letter concerning a 1991 Virginia individual income tax assessment for*************(the "Taxpayers"). In a telephone conversation with a member of my staff, the Taxpayers also expressed concern that the 1990 Virginia individual income tax return was incorrectly filed based on their residency status.

FACTS


The Taxpayers, who were domiciliary residents of Virginia, accepted from their employer in 1989 a two year assignment in another country. The assignment contract stipulated that the project could be extended beyond two years subject to the continuing need for the contractor's services and availability of funds. Upon leaving Virginia, the Taxpayers sold their house and cars and took their children out of Virginia schools. They maintained their Virginia voting registration although they stopped voting in Virginia elections. The Taxpayers did not purchase property, register to vote, or maintain bank accounts in the other state. Further, a 1990 Virginia resident income tax return was filed although the Taxpayers state it was prepared in error by the accountant.

After two years, the assignment ended without being extended for additional years. The Taxpayers returned to Virginia since they could not retire at that time and filed a 1991 part-year income tax return moving into Virginia. The return was adjusted through the department's compliance program indicating that the Taxpayers were domiciliary residents of Virginia while they were out of the country, and an assessment was issued. The Taxpayers contend that they were domiciliary residents of the other state since at the time they left Virginia they had no intentions of returning and intended to retire in the other state after the employment assignment was completed. They are requesting that the payments toward the 1991 assessment and the 1990 income tax return be refunded.


DETERMINATION


Code of Virginia §58.1-302, copy enclosed, sets forth two classes of residents, namely, a domiciliary resident and an actual resident. The enclosed P.D. 90-198 (November 9, 1990) further describes these residency classes. A domiciliary resident does not break residency status merely because an employer assigns the resident to work in a foreign country. Therefore, a Virginia domiciliary resident working in a foreign country is required to pay Virginia individual income taxes to the extent such wages are includable in federal adjusted gross income.

For a person to change domiciliary residency to another state, that person must intend to abandon their Virginia domicile with no intention of returning to Virginia. Concurrently, that person must acquire a new domicile where that person is physically present with the intention to remain there permanently or indefinitely.

Several factors make it clear that the Taxpayers did not abandon their Virginia domicile. They did not acquire domicile in the other state by physical presence. Additionally, they did not purchase property, register to vote, establish banking accounts, or carry on any similar actions in the other state. The registration for voting remained in Virginia and a 1990 Virginia income tax return was filed. Other than exploring the opportunity of moving to the other state, the Taxpayers have not furnished any evidence of the actions actually taken to acquired a domiciliary residence in the other state once they left Virginia.

In a telephone conversation with a member of my staff, the Taxpayers express the possibility of determining the foreign country to be their domiciliary residence upon leaving Virginia. However, from the information furnished, the Taxpayers never intended to permanently or indefinitely live in that country once they left Virginia. To the contrary, their stay in the foreign country was based on their assignment by the employer for a definite period of time, after which they intended to return to the United States.

Based on the information provided, there is no basis to conclude that the Taxpayers abandoned Virginia as their domiciliary residence when they moved to the foreign country. Consequently, the 1991 assessment was properly issued and the 1990 Virginia income tax return was properly filed.

If other assistance is needed, please do not hesitate to contact the department.

Sincerely,




Danny M. Payne
Tax Commissioner



OTP/8561N

Rulings of the Tax Commissioner

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