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Ambox globe.svg This article contains details specific to global investing. It applies to non-US investors, United States (US) investors, and US citizens and US permanent residents (green card holders) living outside the US.

In law, domicile[1] is the status or attribution of being a lawful resident[2] in a particular jurisdiction.

  • A person's domicile is often the determinant factor for many legal aspects, including investing and taxation of it.
  • Also investment funds have a domicile. Also here it determines the applicable legislation, including taxation.

Domicile of a person

In law, domicile is the status or attribution of being a lawful resident in a particular jurisdiction.

The domicile of a person will impact which fund a person can and should invest in.

In most countries, the domicile of the investor determines the applicable rules; there are two notable exceptions to this: nationals of Eritrea and the US are taxed by their country independently of where they are domiciled[3].

A person can remain domiciled in a jurisdiction even after he has left it, if he has maintained sufficient links with that jurisdiction or has not displayed an intention to leave permanently (i.e. if that person has moved to a different state but has not yet formed an intention to remain there indefinitely).

Domicile from a US standpoint

  • US citizens
  • US resident aliens : that is, green card holders. [note 1]
  • US persons: US citizens, resident aliens and residents are known collectively as US persons.
  • Expatriate: The US Internal Revenue Services (IRS) code defines "expatriate" as someone who has given up US citizenship or Permanent Resident (Green Card) status. Take care not to confuse this with the more normal English meaning of the term "expatriate," which merely refers to a citizen of one country residing in another country. To avoid confusion, this page avoids the term "expatriate" and uses "US person living outside the US" or "US person living abroad" to mean US citizens and Green Card holders living in countries other than the US.
  • US nonresident aliens : is someone who is not a US citizen or resident.
If you are an alien (not a US citizen), you are considered a nonresident alien unless you meet one of two tests. You are a resident alien of the United States for tax purposes if you meet either the green card test or the substantial presence test for the calendar year (January 1-December 31). [4]
In short, if you are not a US citizen or green card holder and have not been in the US for 183 days (calculated over a 3 year period), you are a nonresident alien for US tax purposes.

Domicile of a fund

Just like a person, a fund or ETF has a domicile. This is the country in which the fund's holding company is legally incorporated, and typically where the administration and management of the fund itself takes place.

Despite investing in identical underlying assets, investors in varying personal 'tax circumstances' will get different results depending on the domicile of the fund they choose to hold. Sometimes wildly different.

US domiciled funds

For a US resident, US citizen or green card holder investing in an US-domiciled fund, the US will not withhold any tax on dividends, and the individual investor is responsible for their own tax payments to the US.

For a nonresident alien or non-US person investing in an US-domiciled fund, the US will withhold up to 30% tax on dividends (the actual rate might be reduce by a tax treaty, typically to 15%), and could levy up to 40% estate tax of the balance on the holder's death

EU domiciled funds

UCITS (Undertakings for Collective Investment in Transferable Securities Directive) is an EU directive that regulates mutual funds and ETFs. It allows the funds to operate freely throughout the EU on authorisation from a single member state.

In addition every EU country has its own legislation and tax-treaties with other countries that govern the funds:

  • Ireland domiciled funds : Ireland treats Irish domiciled funds advantageously: in particular there are no dividends taxes nor capital gains tax on dividends of Irish funds. In addition Ireland has beneficial tax-treaties; in particular with the US. This treaty lowers dividend taxation to 15%.
  • Luxemburg domiciled funds : almost equally good, however dividends of US securities are subject to an US withholding tax of 30%
  • other EU countries often have legislation or tax treaties that negative for the investor: examples of these are
    • levy a dividend witholding tax on the dividends distributed by the fund: this can lead to triple taxation for the investor: on the asset level, on the fund level and by the country of the investor.

Other domiciles of funds

Many countries have funds domiciled in their country, with their specific characteristics

  • Australia
  • Canada
  • Germany
  • Hong-Kong
  • Singapore
  • UK

Impact of domicile of a person on investing

The domicile of a person will impact which fund a person can and should invest in.

EU residents

The introduction of EU-wide legislation, in respect to investment has introduced significant hurdles for EU investors in regards to their access to funds domiciled outside of the US, in particular US-domiciled funds, and introduces complexity in respect to various matters including taxation.

Impact of US legislation on investing by non-US persons

The US legislation impact the investing by non-US persons (known as Nonresident aliens in US legislation). The US has harsh tax rules for US assets held by foreigners, some bordering on confiscatory. It taxes dividends paid by US stocks and US domiciled ETFs to foreigners at up to 30%, and may apply an estate tax of up to 40% on all US situated assets above a minimal $60,000 exemption. Be sure to understand how these tax rules will apply to you. If you need to avoid them, switch away from the usual US domiciled investments discussed among and used by US investors, and instead use equivalent investments domiciled in other countries, for example Ireland.

Taxation as a US person living abroad

Taxation as a US person living abroad involves special considerations for individual taxpayers. Uniquely among developed countries, the US taxes its citizens and permanent residents on their worldwide income whether they live in the US or outside.

It has protectionist and draconian tax laws that dissuade US citizens and residents from holding non-US domiciled investments.

If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.

Among the tax issues confronting US persons living abroad are additional reporting requirements for foreign bank and investment accounts, along with a number of applicable exclusions, deductions, and tax credits. A non-citizen spouse presents potential limitations on the inheritance and gifting of assets. Special tax assessments may be levied on the assets of those who renounce or relinquish citizenship, or abandon permanent residency.

Because of these, you must usually invest as if living in the US, and you effectively cannot use normal investments freely available to non-US persons living in the same country as you.

Choosing the domicile of the funds to invest in

As an investor one can choose the domicile of your investment funds. Next to home-domiciled funds, the choice is often between US-domiciled funds and Irish domiciled funds as these seem generally the best.[citation needed]

As a EU investor one only has a limited access to funds domiciled outside of the EU. (( see #EU residents above )) Non-Us investors can use the decision tables in Non-US investor's guide to navigating US tax traps to choose the domicile of your investment funds.

Tax legislation and tax treaties

Every country has its own tax legislation for individuals and funds. Domicile determines which countries tax legislation is applicable.

Countries agree on tax treaties that determine the cross border topics related to tax. One of the topics often discussed in the tax treaties is avoidance of double taxation.

Tax treaties

((non=exhaustive table))

Country/Region Treaties
Australia Australian Tax Treaties
Canada Tax Treaties: in force
European Union Treaties for the avoidance of double taxation concluded by Member States
Hong Kong Comprehensive Double Taxation Agreements concluded
India Double Taxation Avoidance Agreements
Israel Avoidance of Double Taxation Treaties
New Zealand Tax Treaties
Norway General tax conventions between Norway and other states
Singapore List of DTAs, Limited Treaties and EOI Arrangements
South Africa Double Taxation Agreements and Protocols
Taiwan Treaty Network
United Kingdom Tax Treaties
United States United States Income Tax Treaties - A to Z
United States International Tax

See also


  1. For Green Card holders, even living outside the US long enough that the card expires or that US immigration authorities consider it no longer valid for immigration does not change their tax and filing status for the IRS. Green Card holders must formally surrender their status to free themselves from US tax filing requirements as a resident alien. This typically requires a trip to the nearest US embassy, and then filing Form 8854, "Initial and Annual Expatriation Statement." See Expatriation tax for further details.


  1. Wikipedia, Domicile (law), retrieved September 17, 2019.
  2. Wikipedia, Residency domicile), retrieved September 17, 2019.
  3. Wikipedia, Accidental American § Taxation of non-residents, retrieved March 17, 2019.
  4. Determining Alien Tax Status

External links