“I declare that I am domiciled in Hong Kong”
If you had a Will drafted by a solicitor in Hong Kong, chances are that the above sentence will appear somewhere in that Will. Most of us wouldn’t give much thought to such a declaration, just like when ticking that checkbox that says “I have read the terms and conditions”, but a person’s place of domicile carries potentially significant consequences that may not immediately be apparent.
How do I know where I’m domiciled?
In Hong Kong, domicile has been governed by the Domicile Ordinance, Cap 596 since 1 March 2009. Under this Ordinance, every person has a domicile and one domicile only, which can come in two forms: domicile of origin and domicile of choice.
Under the Domicile Ordinance, a person’s domicile of origin from birth follows his/her parents’ domicile save in rare situations where the parents have different domiciles and live separately. The domicile of origin is retained until a new domicile is acquired by choice as an adult.
A domicile of choice is, as its namesake implies, acquired through a person’s voluntary acts. For instance, the Domicile Ordinance allows a person to acquire a domicile in Hong Kong if he/she is physically present in Hong Kong and demonstrates the intention to make a home in Hong Kong for an indefinite period of time. What amounts to such an intention depends very much on the person’s conduct, and the following is a non-exhaustive list of factors that can be considered:
- Length of residence;
- Condition of residence, including whether the person lived in a purchased or rented property;
- Location of business interests, property and investments;
- Tax residency;
- Marriage with a local partner;
- Locations of family members, particularly spouse and children;
- Membership and involvement with local organisations;
- Official declarations of domicile or residence.
It is important to note that the “indefinite period” is a crucial element of the intention. Hence, if an expatriate arrives in Hong Kong for work but fully expects to leave once his duties are completed, he would not be considered to have acquired a domicile in Hong Kong.
Why should I be concerned?
While a person’s domicile might not have a significant impact on a person’s daily life, there are several issues that may surface once he/she has passed away.
Under Hong Kong law, succession of a deceased person follows the law of the place of the place of the deceased’s domicile. The Probate Registry in Hong Kong also requires additional formalities and papers to be filed when dealing with cases where the deceased died domiciled outside Hong Kong: for instance, if a person dies domiciled in the UK without leaving a will, unless a grant can be resealed, a prospective administrator will need to file an affidavit signed by a UK solicitor confirming that under UK law, the prospective administrator is the person who is entitled to obtain a grant of administration to the estate (this is notwithstanding that Hong Kong’s probate laws are based on and largely similar to those of the UK).
But the effects go further:
- Intestacy laws vary between jurisdictions, and if a person dies intestate in Hong Kong but domiciled elsewhere, his/her assets must be distributed in accordance with the law of the place of domicile notwithstanding that those assets are all located elsewhere, potentially adding another degree of complexity to estate administration. For example: the widow can inherit everything from the Deceased husband under UK intestacy rules if they are childless, but not under HK intestacy rules because HK did not follow the change of law in the UK in 2015. This is particularly important for parties in same sex relationship, the marriage of which is recognised under the UK laws but not HK.
- Domicile is often linked to tax residency, and a person who meets the criteria of being domiciled in a certain jurisdiction is likely also to be considered a tax resident of that jurisdiction. Some jurisdictions may have worldwide tax regimes in place, including inheritance taxes, and a person dying domiciled in such a jurisdiction would be subject to worldwide inheritance tax despite those assets being located elsewhere.
The exception is with regards to real property, which follows the law of where the property is located regardless of domicile.
Considering the above, the seemingly-unassuming phrase “I declare that I am domiciled in Hong Kong” starts to make a lot of sense when drafting a Will:
- the declaration can be relied on as evidence when the domicile of a deceased is in dispute;
- there are no inheritance taxes in Hong Kong, leaving a greater share of the estate available to the beneficiaries.
Domicile remains a complex area of law that is extremely fact-sensitive and has potentially far-reaching effects on the future distribution of your wealth. Bear in mind that concept of domicile discussed above is based on the common law system, which is fundamentally different from the civil law system – common in countries in continental Europe and Asia. A person can also have a domicile in one country and a tax residence in another country, or a domicile in one country but at the same time a deemed domicile in another country for tax purpose.
Clear and precise estate planning becomes most important with multi-jurisdictional assets and family members around the world.
This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.