What is a ‘Tax Domicile’?
Tax domicile is a legal concept that connects an individual with a particular country. It is an accepted principle that, regardless of where a person resides, that person’s tax domicile continues to connect a person to the country of domicile, giving rise to tax obligations in that country on certain income.
What is ‘Tax Domicile’ under Maltese law?
Tax domicile is complex and adhesive common law concept, adopted in its simpler form in Maltese tax law, and refers to the country of strongest connection of a taxpayer.
Where is your Tax Domicile?
The basic rule is that a person has their tax domicile in the country where they have their permanent home - the country regarded as the 'homeland'. However, one can remain Maltese tax domiciled even after living abroad for many years.
What is a ‘Malta Tax Domicile’?
A Malta Tax Domicile is the strongest tax connection with Malta held by one’s father at birth, or acquired after reaching majority. It is hard to lose a Maltese tax domicile and likewise, it is difficult for a foreign non-domiciled person to acquire a Malta Tax Domicile.
What is a Company’s ‘Tax Domicile’?
A company’s tax domicile is generally the country of registration or incorporation of a company. A company registered in Malta is deemed to be a Malta domiciled company.
What are the origins of Tax Domicile in Maltese law?
Maltese law on Tax Domicile originally followed the doctrine emanating from Roman Law. However, the 1923 judgement in A. Warrington v. E. Carter shifted the definition of Tax Domicile and Maltese courts adopted the British definition of tax domicile, referred to as the Common Law approach to tax domicile.
What is the definition of Tax Domicile in the Income Tax Act?
The Income Tax Act does not provide a definition of the term ‘tax domicile’. Maltese courts rely on judicial interpretation for a definition of ‘tax domicile’.
Tax Domicile in Maltese precedent
In Loreto Camilleri vs Avv. Dr. George DeGiorgio et. noe the Maltese Courts clearly explained that:
‘Every person shall have a domicile, and shall have his domicile at birth, which is that of origin, and which may never be abandoned but only positively supplanted in favour of another domicile which is the domicile of choice. And no person can have more than one domicile at the same time. '
Can a person have multiple tax domiciles?
Contrary to residence, no individual can have multiple tax domiciles. One can change his tax domicile – however, it is more complex than taking up residence in another country.
What is a ‘Tax Domicile of Origin’?
A person acquires tax domicile of origin at birth, automatically acquiring the tax domicile of their father. In cases where the child is born out of wedlock or when the father had passed away the child, adopts the domicile of his mother.
The country where a person is born is not necessarily his domicile of origin, hence if for example one is born in Malta but his father is domiciled in Germany he would be domiciled in Germany.
The domicile of origin is not changed unless one acquires a domicile of choice. Hence, it is irrelevant whether one leaves the country of his domicile of origin permanently because this does not automatically imply a change in his domicile status. Domicile of origin remains relevant throughout the life of the person as domicile retains its capacity for revival.
In order to ensure that the domicile of an individual has been changed to his domicile of choice there must be clear evidence that the individual has no intention whatsoever to return to the country of his domicile of origin.
The importance enjoyed by the domicile of origin results from its automatic revival whenever a domicile of choice is abandoned without the acquisition of a new one[1].
What is a ‘Tax Domicile of Choice’?
Although the domicile of origin is very difficult to renounce, once a person is eighteen, he has the legal capacity to adopt a new domicile – a domicile of choice.
At law, the presumption is that one’s domicile is the domicile ex-lege, meaning the one assigned at birth. This implies that when one alleges that he has acquired a domicile of choice, the burden of proof falls upon him.
In order to do so one must be able to prove that:
- He is resident in the new country
- He intends to reside there permanently or for an unlimited time
Contrary to the domicile of origin, one must be physically present in a country in order to obtain the domicile of choice there. Other factors also come into play when determining domicile of choice, such as the individual’s business and family interests as well as ownership of property. One must break all ties with other countries to be domiciled in Malta.
In IRC v. Bullock (1976), it was determined that even though the one had resided in England for forty years he had not adopted domicile of choice in England, as his intentions never those of residing in England indefinitely. Hence the court determined that domicile of choice was not taken up by Mr Bullock and that he had maintained his domicile of origin.
What is a ‘Tax Domicile by Operation of Law’?
To establish a definite legal system by which certain rights and obligations may be governed, the objective of the law is that no person shall be without a domicile. This is crucial today, especially because free movement has given not only rights to individuals but also obligations and in the interest of liability, it is necessary to hold that a person cannot posses more than one domicile at the same time.
Given the importance of having a domicile, in situations where one cannot establish the domicile of origin and is unable to make a choice, the law intervenes. The third kind of domicile is the domicile of dependence and it arises by operation of law.
It is a domicile in which the law establishes a person’s domicile, such as in the case of a foundling, where the law provides that a foundling acquires the domicile of the country where he is found.
It has been held that as the domicile of origin requires the child to take the domicile of the father at birth, in the case where either the child’s father is dead or the child is illegitimate, the child acquires the domicile of the mother.
Until one has the legal capacity to adopt a domicile of choice, his domicile of origin will be replaced by domicile of dependence should the person on whom he is legally dependent adopt a domicile of choice elsewhere. This means that until a person reaches adulthood his domicile will shift according to the domicile of the person on whom he is dependent. Women take up their husband’s domicile upon marriage and such domicile is maintained even if they are legally separated or if the husband passes away (Attard, 2005).
What is ‘Non-Domiciled Status’?
When one becomes a tax resident of Malta, but neither his nor his father’s domicile is Maltese, then for tax purposes, one is considered as ‘non-dom’. Typically a foreigner will be considered to have non-domiciled tax status in Malta.
What does ‘non-dom’ mean?
Non dom is short for non-domiciled and refers to non-dom tax status. Non-doms are persons not domiciled in Malta for tax purposes.
What is ‘res non dom’?
‘Res non dom’ is short for residence non-domiciled tax status. Under Maltese law, res non dom status means that an individual resident for tax purposes is taxable only on a source and remittance basis. This means that a res non dom is not subject to tax on foreign-source income that is not remitted to Malta. Foreign source capital and capital gains may be remitted without any tax liability, save for living expenses covered by non-remitted income.
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[1] Mann, Michael. “The Domicile Bills.” The International and Comparative Law Quarterly, vol. 8, no. 3, Cambridge University Press, 1959, pp. 457–64..
