Tax Type
Individual Income Tax
Description
Intent to establish domicile in another country;
Topic
Residency
Date Issued
04-05-2005
April 5, 2005
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the individual income tax assessment issued to your client, ***** (the "Taxpayer") for the taxable year ended December 31, 1999.
FACTS
The Taxpayer resided in Virginia until he was transferred by his employer to ***** ("Country A") in May 1992. Upon his transfer, the Taxpayer received an employer sponsored "temporary work permit" to reside in Country A. From March 1995 through March 1996, the Taxpayer was reassigned back to Virginia. In March 1996, the Taxpayer returned to employment in Country A, where he has continuously worked and resided.
The Taxpayer acquired a Country A driver's license in 1993 and has owned and registered a vehicle in Country A since that year. The Taxpayer rents a residence in Country A under a long-term rental agreement. In 2001, the Taxpayer received a "permanent resident permit" to reside in Country A. The Taxpayer has voted in Country A national and local elections since receiving the permanent resident permit.
The Taxpayer retained a Virginia driver's license throughout the years he resided in Country A. He also owned a home in Virginia that had been continuously rented to unrelated third parties since July 1993 until the house was sold in January 2000. The Taxpayer filed nonresident Virginia income tax returns for the 2000 through 2002 taxable years.
The Department assessed income tax, penalty and interest against the Taxpayer for the 1999 taxable year because he failed to establish a domicile in Country A, as evidenced by his temporary work permit. The Taxpayer contends that he was domiciled in Country A in 1999.
DETERMINATION
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Va. Code § 58.1-302. The domiciliary residence of a person means that the permanent place of residence of a taxpayer and the place to which he intends to return even though he may actually reside elsewhere. For a person to change domiciliary residency to another state, that person must intend to abandon his 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. An actual resident of Virginia means a person who, for an aggregate of more than 183 days of the taxable year, maintained his place of abode within Virginia. A Virginia domiciliary resident, therefore, working in other parts of the country who has not abandoned his Virginia residency continues to be subject to Virginia taxation. Additionally, a person who is not a domiciliary resident of Virginia, but who stays in Virginia for an aggregate of more than 183 days is also subject to Virginia taxation.
In order to change from one legal domicile to another legal domicile, there must be (1) actual abandonment of the old domicile, coupled with an intent not to return to it, and (2) an acquisition of a new domicile at another place, which must be formed by personal presence and an intent to remain there permanently or indefinitely. The burden of proving that the domicile has been changed lies with the person alleging the change.
In determining domicile, consideration may be given to the individual's expressed intent, conduct, and all attendant circumstances including, but not limited to, financial independence, profession or employment, income sources, residence of spouse, marital status, sites of real and tangible property, motor vehicle registration and licensing, and such other factors as may be reasonably deemed necessary to determine the person's domicile. A person's true intention must be determined with reference to all of the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency.
The Department concedes that it is difficult to know whether a taxpayer intends to return to Virginia. The Department determines a taxpayer's intent through the information provided. In the case presented, the Taxpayer has the burden of proving that he abandoned his Virginia domicile and established a new domicile outside Virginia in 1999. If the information is inadequate to meet this burden, the Department must conclude that the Taxpayer intended to remain indefinitely in Virginia.
In issuing the assessment for the taxable year ended December 31, 1999, the Department concluded that the Taxpayer failed to establish a permanent residence in Country A in 1999 because he had a temporary work permit. A temporary work permit is an annual residence permit that gives an individual a right to live in Country A for 180 days or more and must be renewed annually. In fact, under Country A's law the Taxpayer was required to show proof that he was still employed by his Country A employer in order to renew the temporary work permit. The Taxpayer's temporary work permit was renewed each year from 1996 through 2000.
In 2001, the Taxpayer received a permanent resident permit. This permit is valid as long as an individual remains in Country A. It has virtually no restrictions and allows an individual to make unrestricted real estate purchases, move from one region to another, and become self-employed. An individual can obtain a permanent resident permit after residing anywhere from 5 to 10 years in Country A with a temporary work permit.
By consecutively renewing the temporary work permit, obtaining a permanent resident permit and through other actions, the Taxpayer has shown his intent to establish domicile in Country A. The Taxpayer acquired a Country A driver's license and has owned cars in Country A since 1993. He has a long-term rental contract for a residence in Country A and he votes in Country A national and local elections. He resided in Country A more than 300 days in 1999. Finally, the Taxpayer had a permanent work contract with his employer to work in Country A. These actions clearly show the Taxpayer's intent to establish domicile in Country A.
The Taxpayer did maintain connections to Virginia. He owned a home in Virginia; however, the home was rented to unrelated third parties since 1993. The home could not be sold prior to 2000 because of a property settlement incident to his divorce. While the Taxpayer retained a Virginia driver's license when he moved to Country A, it was not renewed upon expiration.
Based on the facts presented, I find that the Taxpayer was a domiciliary resident of Country A in 1999. Therefore, the assessment issued to the Taxpayer for the taxable year ended December 31, 1999 will be abated.
The Code of Virginia section cited, as well as other reference documents are available on-line in the Tax Policy Library section of the Department's web site, located at www.policylibrary.tax.virginia.gov. If you have any questions regarding this determination, you may contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
-
-
-
-
-
-
-
- Sincerely,
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Kenneth W. Thorson
Tax Commissioner
-
-
-
-
-
-
-
-
AR/48854B
Rulings of the Tax Commissioner