12-26 | Virginia Tax

Tax Type

Individual Income Tax

Description

Establish domicile in a foreign country and continue to be a United State, citizen.

Topic

Domicile

Persons Subject to Tax

Residency

Taxable Income

Date Issued

03-15-2012

March 15, 2012

Re: Request for Ruling: Individual Income Tax

Dear *****:

This is in response to your letter in which you request a ruling with respect to the domicile of ***** (the "Taxpayers"), for the taxable year ended December 31, 2010. I apologize for the delay in the Department's response.

FACTS

The Taxpayers were Virginia residents who owned a home in Virginia and worked in Virginia in 2009. The wife, who was born in the ***** (Country A), is a dual citizen of the United States and Country A. The wife retired from employment in Virginia, moved to Country A in August 2009, and rented a home. The husband retired and moved to Country A in April 2010 to live with his spouse. They retained their Virginia driver's licenses after moving to Country A and maintained automobiles registered in Virginia. The Taxpayers also owned a home in Virginia until April 2010.

The Taxpayers contacted the Department to determine how they should file their Virginia income tax returns. The Department advised the Taxpayers that, as citizens of the United States, they remained domiciliary residents of Virginia and must continue to file as residents. The Taxpayers filed individual income tax returns as residents for the 2009 and 2010 taxable years. They now request a ruling concerning their status as residents of Country A.

RULING

Residency

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 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.

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 or domicile.

The Department determines a taxpayer's intent through the information provided. The Taxpayer has the burden of proving that he or she has abandoned his or her Virginia domicile. If the information is inadequate to meet his or her burden, the Tax Commissioner must conclude that he or she intended to remain indefinitely in Virginia.

In August 2009, the wife retired and moved to Country A, where she established a place of abode near her elderly mother. She maintained her Virginia driver's license after moving to Country A to be able to drive in both the United States and Country A until she obtained a Country A license. She did not renew her Virginia driver's license after moving to Country A.

The husband remained in Virginia until he retired and sold the Taxpayers' home and property in Virginia. In May 2010, he moved to Country A. The Taxpayers purchased a home in Country A in September 2010. The husband did not renew his Virginia driver's license.

Virginia Code § 46.2-323.1 states, "No driver's license . . . shall be issued to any person who is not a Virginia resident." Every person applying for a driver's license must execute and furnish to the Commissioner of the Department of Motor Vehicles a statement that certifies the applicant is a Virginia resident. A person providing a false statement is subject to punishment under the laws of the Commonwealth. The Department has found that an individual may successfully establish a domicile outside Virginia even if they retain a Virginia driver's license. See Public Document (P.D.) 00-151 (8/18/2000). However, obtaining or renewing a Virginia driver's license is considered to be a strong indicator of intent to retain domiciliary residency in Virginia. See P.D. 02-149 (12/09/2002). In this case, the Taxpayers did hold Virginia driver's licenses after moving to Country A, but did not renew the licenses.

The Department has also previously ruled that an individual can abandon a Virginia domicile and establish domicile in a foreign country and continue to be a United State, citizen. See P.D. 00-6 (2/28/2000).

After reviewing the information at hand, I find that the wife changed her domicile to Country A when she moved there in August 2009. The husband changed his domicile to Country A in May 20110, when he sold the Taxpayers' home and property in Virginia and moved to Country A.

Filing Requirements

The Taxpayers would be subject to Virginia individual income tax as domiciliary residents of Virginia until the date they changed their domicile to Country A. In addition, the Taxpayers would be subject to Virginia income tax as nonresidents of Virginia on income attributable to Virginia after their domicile changed to Country A.

In this case, the wife should file a 2009 part-year resident return for the portion of the year she was domiciled in Virginia. If she earned or received income from Virginia sources after her move, she would file a nonresident return for the remaining portion of the 2009 taxable year and thereafter. Similarly, the husband would file a part-year return for the 2010 taxable year and nonresident returns thereafter as necessary.

The income tax returns, along with a copy of this letter, all applicable attachments and payment of the balance due, if any, should be mailed to: *****, Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203.

The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. The individual income tax forms and instructions are also available from the Department's web site. If you have any questions regarding this response, you may contact ***** at *****.

- - - - Sincerely,

- - - - Craig M. Burns
        Tax Commissioner

AR/1-4697116153.E

Rulings of the Tax Commissioner