Choosing the Right Path: Evaluating Irish-Domiciled Funds and US-Listed Funds

Choosing the Right Path: Evaluating Irish-Domiciled Funds and US-Listed Funds


Did you know there are more than 8,700 Exchange-traded Funds (ETFs) globally? For beginners, the process of starting to invest can be daunting. In this post, we will be focusing on buying Exchange-Traded Funds, an investment product which mirrors the holdings of an index. In a further article, we will be discussing the differences between ETFs, mutual funds and index funds.

One of the indices you may have heard of is the S&P 500, which tracks 500 US-listed companies. If you’re a non-US resident interested in investing in the S&P500 Index, you might have come across the question of whether to choose US-listed funds or Irish-domiciled funds.

There are many indexes globally, but the S&P 500 is generally known to everyone, which is the example we will be using in this post. As an investor, you cannot directly invest in the S&P 500 Index. However, the easiest way to gain exposure to this renowned index is through investing in S&P500 Exchange-Traded Funds (ETFs). ETFs are similar to stocks in which they are traded on the stock market, allowing you to buy and sell them easily.

In another article, we will delve into the intricacies of indexes and ETFs, however, in this post, we will focus on the differences between US-Listed Funds and Irish-Domiciled Funds which will help you make an informed decision.

A number of popular S&P500 ETFs available in the US are:

  • Ticker: SPY – SPDR S&P 500 ETF
  • Ticker: VOO – Vanguard S&P 500 ETF
  • Ticker: IVV – iShares Core S&P 500 ETF

However, making long-term investments in US-listed S&P500 ETFs may not be most suitable for non-US citizens.


Taxes when holding ETFs

There are two taxes to be aware of when investing in ETFs, withholding tax & estate taxes.


  1. Withholding Tax

Non-US residents investing in the US stock market will be subject to a 30% Withholding tax on dividends received. This means that if you receive $100 in dividends, you’ll only end up with $70 after the 30% withholding tax deduction. This also applied to holding US-listed stock which pays out dividends.


  1. Estate Tax

Additionally, foreign investors in the US are subject to an estate tax of 40%.


Hence, if a person were to die with $1 million worth of stocks or ETFs, $400k would go to the US government and their designated nominee would only get $600k.


Across the pond: Buying Ireland-Domiciled ETFs

The alternative to buying US-listed ETFs is Ireland-Domiciled ETFs. The benefit of this is lower taxation due to the US-Ireland Treaty.

This means the withholding tax is 15%, compared to 30% on US-Listed ETFs.

A number of popular S&P500 ETFs available which are Ireland-domiciled are:

  • Ticker: SPXS – SPDR S&P 500 UCITS ETF
  • Ticker: VUAA – Vanguard S&P 500 UCITS ETF
  • Ticker: IDUS – iShares Core S&P 500 UCITS ETF


What are UCITS?

You may have spotted the change in the wording above from the US-Listed ETFs, which includes Undertakings for Collective Investments in Transferable Securities, otherwise known as UCITS. This is the European Commission’s supervisory framework for managing and distributing investment funds in the EU.

They are similar to US-listed funds yet they are registered in countries in the EU, in this case, Ireland which is then regulated by the member country.

There are plenty of UCITS listed in the EU, and they are perceived to be safe, regulated investments which are cheaper when considering taxes.


What should I look out for when choosing an ETF?

There are 6 factors which you may need to consider when looking at investing:


  1. Currency

The above ETFs I have mentioned are all USD-denominated. There are also GBP equivalent ETFs which you may want to consider.

For individual investors in Hong Kong, as the Hong Kong Dollar is pegged to the US Dollar, you can be certain to get a good forex rate when exchanging currencies. There are a couple of Hong Kong dollar-denominated ETFs, yet the expense ratio of these funds may be higher than those listed above. As a previous article mentioned, fees can eat away at your gains.


  1. Dividends

These exchange-traded funds handle dividends in two different ways:

  • Distributing: You receive a redistribution of your dividends.
  • Accumulating: The fund automatically reinvests your profits.

The above ETFs mentioned are all accumulating funds. Should you wish to receive your dividends, there are equivalent ticker codes for each ETF.


  1. Expense Ratio

The expense ratio, or management fee is a cost of managing the ETF. It’s important to keep your costs low in order to maximise your gains. In this instance, these funds typically range from 0.05% to 0.10% per annum.

You won’t see this fee coming out of your account, as it is already taken out before setting the price of the ETFs.


  1. Unit Price

Certain ETFs have higher share prices per unit than others. This can affect your flexibility when it comes to monthly investments. Low investment capital may mean you might not be able to buy enough shares for the minimum share lot needed. Some ETFs may need a high share lot, (usually buying a fixed quantity of units at one time) when buying the ETF.


  1. Fund Size

Generally speaking, an ETF’s fund size is a solid sign of both its popularity and sustainability. Larger ETFs can make use of economies of scale to reduce expenses.

Whichever S&P500 ETF you choose, you’ll be in excellent order because ETFs are also rather substantial in size (billions).


  1. Trading Volume

One of the influences of an ETF’s liquidity is the trading volume of the securities within the ETF. In this example, the companies in the S&P 500. A higher trading volume could mean more buyers and sellers in the market, willing to buy or sell units to you, making transactions easier to trade.

Another influence can be the bid-ask spread on these funds. This is the difference between the lowest price a seller is prepared to take (the ask or offer) and the greatest price a buyer is ready to pay (the bid).

A narrow bid-ask spread is often indicative of increased liquidity. Remember, if you are worried about a market downturn and you sell due to ‘market conditions’, there is someone on the buy trade willing to pay for that price. One man’s loss could be another man’s gain!



In the end, it could be challenging to keep your portfolio free of any US-listed funds or stocks. The MSCI All Countries World Index, one of the most popular benchmarks for global equities portfolios, includes more than 60% of the United States. Stay tuned to more information about broadly diversifying internationally.

Although the US market’s depth and liquidity may outweigh the potentially burdensome tax duties, you may still obtain the same US exposure in a more tax-efficient way by looking at other structures like UCITS funds and ETFs. Always have in the back of your mind costs are important, particularly when achieving your long-term investment goals.