1. Dividend withholding tax
When a fund receives dividends from US companies, the US withholds tax before the money reaches the fund. The rate depends on the fund's domicile:
- US-domiciled ETF → a non-treaty foreign investor typically suffers 30% withholding on dividends paid out to them.
- Irish-domiciled UCITS ETF → only 15% withholding on US dividends entering the fund, thanks to the US–Ireland tax treaty.
That 15-point gap is structural and recurring. On a US-equity portfolio yielding ~1.5%, it's worth roughly 0.2% per year — quietly compounding in the UCITS fund's favour for many investors. Your own country's tax treaty with the US can change the exact picture, which is why we built the Tax Assessor.
2. US estate tax — the big one
This is the risk most investors don't know about. US-situated assets — including US-domiciled ETFs — can be subject to US estate tax of up to 40% when a non-resident, non-citizen owner dies, with an exemption of only $60,000.
Estate-tax treaties between the US and a handful of countries can raise that threshold, but most investors aren't covered. For a large US-ETF position, the potential liability dwarfs any cost saving.
3. Can you even buy it?
Since 2018, EU regulation (PRIIPs) requires a Key Information Document for any product sold to EU retail investors. US ETF issuers don't produce one, so most EU/UK brokers simply can't offer US-listed ETFs to retail clients. We explain the mechanics in Why EU investors can't buy US ETFs.
4. Cost and choice
Here US ETFs have a genuine edge: the largest US ETFs are enormous, ultra-liquid and often a few basis points cheaper, and the US market offers more niche strategies. UCITS costs have fallen sharply, though — core S&P 500 and All-World UCITS ETFs now charge as little as 0.07–0.22%. For the vast majority of investors the cost difference is immaterial next to the tax and estate considerations above.
The bottom line
- Non-US investor? UCITS is usually the right default — lower US withholding, no US estate-tax exposure, and actually purchasable.
- US person? US ETFs — UCITS funds create PFIC tax problems for you.
- Use the US ETF → UCITS Equivalent finder to find the UCITS version of the fund you already had in mind.
Dividend, capital-gains and withholding rates for 30+ countries.