r/investing
Best foreign domiciled ETF for S&P 500?
Non-US investor seeks low-fee, non-US domiciled S&P 500 ETF alternatives to VOO to mitigate estate and dividend tax liabilities.
I'm not American and dont live in the US. However, my wife is American, (but not a US resident).
I recently learned that upon my passing, all of my US domiciled equity holdings in VOO will be subject to US estate taxes before they are given to my wife!
I'm annoyed I didnt know this already, but glad I found out before its too late! It seems I can bypass this liability by moving into non-US domiciled etfs, such as VUAA.
I also learned that i can lower my dividend taxes from 30% to 15% in non-US domiciled funds?
However it seems that the expense ratio of these ETFs is much higher at 0.07% as compared to 0.03% for VOO.
First, if my understanding above is wrong, please let me know.
And then, does anyone have a better product/solution for lower fee non-US domiciled etfs?
Thnaks!
estate tax only kicks in for amounts above $15 million dollars
When it comes to US estate tax, non-residents only get a tiny $60,000 exemption. To get the massive $15 million exemption, your home country must have an estate tax treaty with the US. Very few countries actually have this treaty, and they are usually close US allies. In Asia, for example, Japan is the only country that enjoys this benefit.
Thanks, I thought the 15 million is for tax free gifting while i am alive. But I was under the impression that all US domiciled equity holdings get hit with estate taxes upon my passing.
I will look into this more and appreciate your input.
Check out CSPX
The law as it stands is that if your US-domiciled holdings are greater than $60K USD, your executor will need to file a form with the US IRS. Your estate will only pay tax if its entire value exceeds $15M. Of course, I would be a little wary because the Trump administration is capable of anything.
If you actually want a non-US alternative, there are many Canadian-domiciled index funds that track the S&P500. An example is VFV.
Thank you.
I self invest thru IBKR and I live in the middle east.
I guess I misunderstood the laws, as I was under the impression that all US domiciled equity holdings get estate taxed upon my passing.
I will look into this some more!
My top pick is VUAA. It’s highly popular among foreign investors looking for an S&P 500 fund denominated in USD. It’s especially great for people whose countries don’t have a tax treaty with the US, because it saves you 15% in withholding tax. Since VUAA is an accumulating fund, it automatically reinvests dividends instead of paying them out. Because there's no visible dividend payout, it also helps lower your local taxes. For instance, my country taxes overseas investment income, so no dividend payouts means I don't have to pay personal income tax on it.
Regarding what you’ve found you’re actually touching on one of the biggest blind spots in global investing.
Yes, using a US ETF like VOO as a non-US investor can expose your estate to US estate tax once US assets go above $60,000. That’s the real risk most people only discover late.
That’s why many switch to Irish UCITS ETFs like VUAA. They’re generally outside US estate tax scope and also more tax-efficient on dividends (around 15% effective US withholding inside the fund vs 30% at investor level).
Yes, the fee difference (0.07% vs 0.03%) exists, but it’s small enough that tax efficiency usually matters more long term.
Other common choices are CSP1 or IWDA if you want broader global exposure.
So the real decision isn’t just cost —it’s structure, tax, and estate safety. Are you optimizing for the lowest fee on paper, or the most efficient setup for where you actually live?