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GAZETTE
sepTemBER
1986
Domicile and Foreign Divorces Act, 1986
by
Brian Bohan, Solicitor
This Act became Law on 2nd October, 1986. The
October, 1986, issue of the
Gazette
contained a note
alerting practitioners to some of the consequences of the
Act. In this article, Brian Bohan, Solicitor, raises more
detailed issues, particularly with regard to taxation.
G
enerally under Irish law, neither married women nor
minors (persons under 18) nor persons of unsound
mind can acquire a domicile of choice. Each of them has
what is known as a "domicile of dependence".
Unheralded and without much publicity, dramatic
changes were made in the domicile of dependants under
the Domicle and Recognition of Foreign Divorces Act,
1986, which became law on the 2nd day of October, 1986.
Prior to that date the domicile of a husband is
conferred on a wife immediately upon marriage and,
while that marriage subsists, she is unable to acquire a
domicile separate and independent of her husband. This
applies even if the spouses are living apart and, indeed,
if either of the spouses left the country permanently and
acquired a domicile in a foreign country according to the
rules of that country.
So, if a husband deserted the wife and went to live
permanently in the U.K., acquiring an English domicile,
his wife still residing in Ireland would also have English
domicile.
If the husband then acquired a valid divorce in the
U.K., it would most likely be recognised in the Republic
of Ireland as it would have been granted in the country
where both spouses were domiciled (the wife having
English domicile of dependency).
It is not the same if the wife deserts the husband and
moves to the U.K. Under Irish Law, she will retain her
husband's domicile by dependence and any divorce
granted abroad would not be recognised.
From on and after the 2nd day of October, 1986, a
married woman is capable of having a domicile
independent of her husband and that domicile will be
determined under the general law. Domicile of
dependency for a married woman is abolished.
The dramatic effect is that a married woman could
have a particular domicile on the 1st day of October,
1986, and under this Act could have a separate and new
domicile on the 2nd day of October, 1986.
H married to W; H deserted many years ago and went
to live in London. He has acquired an English domicile.
On the 1st day of October, 1986, W has English
domicile (by dependence).
On the 2nd day of October, 1986, W has Irish domicile
under general rules (birth, permanent home, etc.,).
H married to W; many years ago W deserted and went
to live in London. She acquired English domicile
according to U.K. Law.
On the 1st day of October, 1986, W has Irish domicle
(by dependence).
On the 2nd day of October, 1986, W has English
domicile (by choice).
There are Tax consequences.
Income Tax and Capital Gains Tax
The concept of domicile in relation to Income Tax and
Capital Gains Tax relates to the treatment of foreign-
source income of an individual who is resident in the State
but domiciled outside the State. U.K. Income is excluded
from the remittance basis of taxation by Schedule 6, Part
III, Paragraph (i) Income Tax Act, 1967, which requires
all Income from sources in the U.K., to be taxed under
the Rules of Schedule D, Case III (as if section 76(2)
Income Tax Act, 1967, did not exist).
If a taxpayer was utilising the remittance basis by
reason of domicile of dependency, this could cease
to have effect from on and after the 2nd day of October,
1986.
Mrs. X, bom in Ireland of an Irish father, is married
to Mr. X who has English domicile but is resident in
Ireland. She is entitled to an Income from a trust fund
in New York but is taxed only on a remittance basis.
By not remitting any of the Income, she suffers no Tax.
This relief will cease to have effect from the 2nd October,
1986.
Capital Acquisitions Tax
The concept of domicile is of much greater importance
in the realm of Gift Tax and Inheritance Tax.
Sections 6 and 12 cover the territoriality aspects of Gift
Tax and Inheritance Tax, respectively.
Where a disponer is domicled in Ireland at the date of
the disposition under which a gift is taken, the whole of
the gift (global property) is subject to Gift Tax.
An exception is made in the case of a discretionary trust
where the domicle is determined for this purpose at the
date of the gift or appointment out of the discretionary
trust (or at the date of death, if the appointment is made
after that date).
Mrs. X, bom in Ireland of an Irish father, is married
to Mr. X, who is domiciled in England but resident in
Ireland.
She is entitled to an estate in New York.
She settles this estate prior to the 2nd day of October,
1986
(a) on trust for herself for life with
remainder to her children,
or
(b) on discretionary trusts.
( a ) In this instance, Mrs. X will be foreign domiciled
at the date of the disposition (i.e., the date of the
settlement) and, provided none of the trust fund is
situate in Ireland, her settlement should escape Gift
Tax and Inheritance Tax (except on a premature
break-up). Remittances of Income to Mrs. X prior
to the 2nd day of October, 1986, will not be subject
to Income tax, whereas all income arising in the
trust fund on and after the 2nd day of October,
1986, will be subject to Irish Income Tax.
Of course, the proper law of the settlement must
be New York.
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