While U.S. mutual funds may no longer be available for Americans abroad, Exchange Traded Funds (ETFs) are generally not restricted for sale to non-U.S. residents (with the exception of EU residents, discussed below). A well designed ETF portfolio provides equal or superior diversification than traditional mutual funds.
Does it matter where an ETF is domiciled?
Domicile matters Typically, ETFs bought by UK-based investors are listed on the London Stock Exchange but domiciled in either Ireland or Luxembourg. The first thing investors should check when selecting an ETF is that the fund has UK tax-reporting and/or distributing status.
Can a UK resident buy a US ETF?
While it is possible to open an account with a US broker if you’re resident in the UK, you will still be denied US-listed ETFs (even if you’re a US citizen) because the regulation is deemed to have “extra-judicial reach”. Invest in the same assets (equities, bonds and real estate) that are available to US investors.
How do you know if an ETF is domiciled?
To help you identify the right domiciliary for your ETF, check the ticker symbol. For example, Vanguard S&P 500 ETF’s ticker is VOO in its US-domiciled version, but the Dublin-domiciled Vanguard S&P 500 UCITS ETF’ ticker is VUSA.
What is a US-domiciled ETF?
US-domiciled ETFs are bought and sold in US dollars. Therefore your pounds must be converted into dollars every time you trade. Most brokers charge a hefty FX rate that’s considerably higher than the real interbank exchange rate.
When to avoid a US ETF domicile?
Because of the threat of extortionate US estate taxes, if you live in a country without a US estate tax treaty, or if your country’s US estate tax treaty is deficient, you should avoid US domiciled ETFs where the balance exceeds $60,000, and strongly prefer non-US domiciled ETFs instead.
Can a US ETF be domiciled in Ireland?
If you live in an EU country where the US tax treaty rate is lower than the US/Ireland tax treaty rate of 15%, you may nevertheless have to accept Ireland domiciled ETFs and live with the slightly worse tax result.
Are there any US domiciled exchange traded funds?
(or SPY). SPY is still one of the largest ETFs in the world today. A potential exception exists if your platform allows so-called sophisticated investors to buy US-domiciled ETFs.
When to use nonresident alien’s ETF domicile decision table?
Using a Nonresident alien’s ETF domicile decision table helps non-US investors decide whether to use US domiciled or non-US domiciled ETFs. When selecting an index tracking fund, non-US investors (that is, US nonresident aliens) have a broad choice between US domiciled ETFs and non-US domiciled ETFs.
