3.1.1.1.2 Domicile

Common law states often apply the concept of domicile as a personal nexus concept. The common law concept of domicile requires a physical presence in combination with the intention of a person to stay indefinitely in a state.1 The requirements of the physical presence and the intention of staying indefinitely set a very high hurdle, leading to the assumption that an individual is still subject to tax in his former home state despite having lived several years in another state. This is the case where he might be considered to have the intention to return home one day. Rust maintained that the common law domicile does not seem to be the ideal solution for inheritance tax purposes as even a domicile can be established and given up if the individual moves from one state to another while harbouring the intention of leaving his home state forever and staying permanently in the new state.2 Finally, it is noted that there are states that apply extended domicile rules to migrating individuals for anti-tax abuse purposes.

Considering the above, I observe that double taxation of an inheritance or donation is possible if one state applies the common law concept of domicile whereas the other applies the civil law concept of residence. This is because the states concerned assess the deceased’s intention under different standards. This would arise where an executive of an international company was assigned to work for a certain period outside his own country. In such instances, the absence of a tax convention may prove extremely problematic.3^, 4