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Domicility, Nationality & Residency.

If you’re an expatriate living abroad, it can get very confusing at times, particularly when it comes to the question of nationality, domicile and residency - Everyone’s unique circumstances determines’ their status, which can be incredibly complicated. Some countries which have a death inheritance tax can result in a hefty tax bill for the beneficiaries if the individuals domicile or permanent country of residency wasn’t made clear.

In addition to that, some countries have what’s called a ‘death duty’, which is basically tax paid on an estate when the individual dies. They may also accrue tax payments on trusts or gifts made by the individual while they were alive. And even in some cases the recipient of the estate may have to pay tax upon transfer of the assets – this is why you need to be clear on your resident and domicile status, so that you can clearly define your tax liability should such an unfortunate event arise.

  • Nationality – is the country in which you were born and raised and who issued your passport
  • Residency – is the country in which you have made your home and would like to remain for the foreseeable future
  • Domicile – is a purely legal concept, though one which is very important to get straight. Your domicile is designated to you at birth and you can only have one at any time. However, you can be domiciled in a country different to where you are currently resident - For example, you could be domiciled in the UK as that’s where you were born and consider to be your home, though you’ve been living in Hong Kong for 10 years and currently have no plans to return.

Ensure that you are fully aware of where your country of domicile is. This information is very handy when writing your Will and can determine how much tax your estate and possessions will be liable for in the event of your untimely death. Don’t take any chances and risk having your loved ones inherit your estate, only to have to fork a huge portion of it out on tax which may have been avoided.

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