Tax Type
Individual Income Tax
Description
Residency; Foreign wages
Topic
Taxpayers' Remedies
Date Issued
11-08-1994
November 8, 1994
Re: Ruling Request: Individual Income Tax
Dear***********
This will reply to your letter requesting a ruling concerning the tax treatment of Virginia residents working in foreign countries and the requirement to pay Unemployment Compensation Insurance to Virginia on these residents.
FACTS
********** (the "Taxpayer") is a multistate corporation that operates in Virginia and contracts with Virginia employees to work inside and outside of Virginia. A ruling is requested for the following questions:
- If an employee transferred to work in a foreign country does not break residency with Virginia, are the employee's foreign wages subject to Virginia personal income tax; and
- If an employee transferred to work in a foreign country under a contract breaks residence with Virginia, are the employee's foreign wages subject to Virginia personal income tax?
RULING
Code of Virginia § 58.1-302 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 transfers the resident to a foreign country to work. A person's domicile continues until it is abandoned and another domicile is acquired. Therefore, a domiciliary resident of Virginia living and working in a foreign country is required to file and pay Virginia individual income tax on foreign wages to the extent such wages are includable in federal adjusted gross income.
For a person to change domiciliary residency to a foreign country, that person must abandon their Virginia domicile with no intention to return to Virginia. In addition, that person must acquire a new domicile, in which they are physically present, with the intention to remain there permanently or indefinitely. If a person has, in fact, changed domiciliary residency to a foreign country, the person must file a Virginia part-year resident return and pay the tax on income earned or received while a Virginia resident.
Your Unemployment Compensation Insurance questions have been forwarded to the Virginia Employment Commission, which administers that program, for response. You may contact the commission at (804) 786-3001.
If other assistance is needed, please do not hesitate to contact the department.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8494N
Rulings of the Tax Commissioner