Domicile

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

A person's domicile is often the determinative factor for many legal aspects, including investing and taxation of it.

Also investment funds have a domicile that 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.

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.

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.
 * 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).


 * 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

European 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.

Please see the country specific pages (See below) for more info.

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.


 * EU investing
 * EU non-habitual residence - on the choice of your residience in the EU to optimise taxation on invessting
 * Investing from outside of the US
 * Nonresident alien with no US tax treaty & Irish ETFs

Denmark
https://www.bogleheads.org/forum/viewtopic.php?f=22&t=290510
 * Any yearly gain from mutual funds, bond funds, or ETFs is taxed as capital income in Denmark, whether you sell or not.
 * Danish tax on capital income is 37.7% for the first ~$6600, and then 42.7% above that! Ouch.
 * Any yearly loss from mutual funds, bond funds, or ETFs is ignored by Denmark... so it always ratchets in their favor.

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
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.

As a EU investor one only has a limited access to funds domiciled outside of the EU. (( see 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.