Domicile, in the context of law, involves the state of being located in a certain area, also referred to as jurisdiction, as a permanent resident. In situations wherein legal matters have to be addressed, a person’s domicile may play a huge part in determining which laws apply to his particular situation. As such, establishing such information may prove to be quite crucial.
At the same time, an individual’s domicile may need to be clearly established in order to determine which tax laws and regulations apply. Evidence for an individual’s domicile may be reflected in official documents, such as a driver’s license, voter’s registration, and the like.
In the context of a company, on the other hand, the established corporate domicile also serves a specific function. It is necessary to prove that a certain company’s main functions are performed in a specific location because this will also determine the laws and regulations which the company needs to follow. The location of the company’s market does not factor into this equation, unless it is exactly the same location where basic operations take place.
Since the aforementioned laws also include tax laws, many corporations make efforts to establish their domicile in territories which are friendly to businesses. Certain states or countries may have fewer requirements for the establishment of a business or may impose lower taxes. Such territories are known as corporate havens. Some corporate havens are more specifically referred to as tax havens, which means that taxes in these areas may be lower than in other locations, or may even be non-existent.