SPY and VTI track the same index. The structure underneath is entirely different.
Most expat investors hold US-domiciled ETFs because that is what their bank account was set up for before they left home. The index performance is essentially identical to the Irish UCITS version. The legal exposure at death is not. This page explains the difference and why it matters for every non-US person holding US-domiciled funds.
Irish-domiciled accumulating UCITS: the structure explained
UCITS stands for Undertakings for Collective Investment in Transferable Securities. It is a regulatory framework established by the European Union that governs how investment funds can be structured, managed, and distributed across EU member states. Funds that comply with UCITS rules carry a regulatory passport that allows them to be marketed across the EU without needing separate regulatory approval in each country.
Ireland is the dominant domicile for UCITS funds because of its combination of the EU regulatory passport, a comprehensive tax treaty network (including an unusually favorable treaty with the United States), a mature fund services industry, and political stability. The vast majority of the world's UCITS funds are domiciled in either Ireland or Luxembourg.
The distinction between accumulating and distributing fund classes matters specifically for mobile investors. A distributing fund pays out dividends as cash. An accumulating fund reinvests dividends back into the fund automatically. For an investor living across multiple tax jurisdictions over time, accumulating funds defer the income recognition event, which can be significant depending on where you are resident when the dividend would otherwise have been paid.
Accumulating funds also simplify the paper trail. No income to declare in one country while you are mid-move to another. No withholding tax on distributions to track. The gain is embedded in the share price and realised only when you sell, at which point you are in one clear tax jurisdiction.
The 40% problem that most expats have never been told about
Under US tax law, any non-US person who holds US-sited assets at death is subject to US federal estate tax on those assets above a $60,000 exemption. US-domiciled ETFs are US-sited assets. SPY, VTI, QQQ, IVV, and every other US-listed ETF falls into this category for non-US persons. The estate tax rate above the $60,000 threshold is 40%.
To put this in concrete terms: a British expat in Singapore who dies holding $200,000 in SPY has a US estate tax liability on approximately $140,000 at 40%. That is $56,000 in tax paid to the US Internal Revenue Service before any local inheritance tax applies. The family may not even know the liability exists until the estate is being wound up.
This is not a theoretical risk for very wealthy investors. The $60,000 exemption is low enough that it affects almost any investor who holds meaningful US ETF positions. A US citizen or green card holder has an exemption of $13.99 million in 2025 (rising to $15 million from 2026). A non-US domiciliary has an exemption of $60,000. The asymmetry is stark.
Irish-domiciled UCITS funds are not US-sited assets. A non-US person holding IWDA (iShares Core MSCI World UCITS ETF, Irish-domiciled) instead of VTI has no US estate tax exposure on that holding, regardless of how large the position grows. The underlying index exposure is essentially the same. The legal characterisation of the asset is completely different.
US ETFs vs Irish UCITS: what the comparison actually shows
The index is not the point. The legal wrapper is the point. Here is what differs across the dimensions that matter for a non-US expat investor.
| Factor | US-Domiciled ETF (e.g. VTI, SPY) | Irish UCITS (e.g. VWCE, IWDA) |
|---|---|---|
| US estate tax exposure | Yes. 40% above $60,000 for non-US persons. | No. Irish-domiciled funds are not US-sited assets. |
| US dividend withholding | 30% withheld for most non-US holders. | 15% via Ireland-US treaty. Embedded in fund NAV. |
| Accumulating class available | Generally no. US mutual fund rules require distributions. | Yes. Acc share classes reinvest income automatically. |
| EU regulatory passport | No. Cannot be sold to EU retail investors under MiFID II. | Yes. Passported across all EU and EEA jurisdictions. |
| Portability across tax residencies | Creates complications when moving to jurisdictions with PFIC or offshore fund rules. | Works across tax residencies without triggering US offshore fund regimes. |
| Index tracking difference | Negligible on major indices. MSCI World, S&P 500 both tracked. | Negligible on major indices. Essentially identical to US equivalent. |
| Ongoing cost (TER) | Often marginally cheaper. VTI: 0.03%. SPY: 0.0945%. | Marginally higher. VWCE: 0.19%. IWDA: 0.20%. Difference is small versus structural savings. |
Why "it's the same index" misses the point
The argument that SPY and its UCITS equivalent are interchangeable because they track the same index is technically correct on investment performance and structurally wrong on everything else. The index determines what the fund buys. The domicile determines how the fund is treated for tax, inheritance law, and cross-border regulatory purposes. These are different questions entirely. Answering the first correctly while ignoring the second is a common and costly error.
Why fund structure matters when you move countries
Expats move. The fund structures that work in one jurisdiction can become problems in another. Irish UCITS were designed for cross-border use. US ETFs were not.
Holding SPY or VTI as a non-US person
The most common structural mistake. SPY, VTI, QQQ, and IVV are excellent funds for US persons. For non-US persons, they carry the 40% estate tax exposure above $60,000. Most holders are not aware of this until they are reviewing their estate documents or until a family member is dealing with a probate process that touches the IRS.
The fix is not complicated: sell the US-domiciled position, buy the UCITS equivalent. VWCE (Vanguard FTSE All-World UCITS) and IWDA (iShares Core MSCI World UCITS) cover the same indices. The transition triggers a taxable event in the year you switch, which needs to be planned, but the ongoing exposure is eliminated.
Moving countries with US ETFs in a brokerage account
A British professional who held US ETFs while living in the US, then moves to Singapore or Malaysia, now has a cross-border structural problem. Several jurisdictions treat US ETFs held by local tax residents as Passive Foreign Investment Companies (PFICs) or equivalent offshore fund regimes, with punitive tax treatment on gains.
UCITS funds generally do not trigger these regimes. An investor who restructures before moving, or promptly after arriving, avoids the problem. An investor who discovers the issue several years into a new tax residency faces a more complicated resolution.
Confusing distributing and accumulating share classes
IWDA (accumulating) and IWDD (distributing) hold the same portfolio. One reinvests dividends automatically. The other pays them as cash. For an expat who has moved to a new country, an unexpected cash dividend from a distributing fund may constitute taxable foreign-sourced income in that new jurisdiction, even if the investor did not intend to receive it.
Accumulating funds keep the income inside the fund. The gain shows in the share price, not in a cash payment. This does not eliminate the tax liability in all jurisdictions, but it does keep control with the investor rather than triggering income events automatically.
Assuming the 30% withholding rate is unavoidable
When a US company pays a dividend to an investor holding a US ETF directly, the US withholds 30% for non-US persons in the absence of a treaty. Many non-US investors accept this as the cost of accessing US equities. It is not.
Irish UCITS funds hold US stocks directly via the Ireland-US treaty, which reduces the withholding rate to 15%. The fund absorbs the 15% rate, not the 30% rate. The investor does not handle the withholding individually. Over a long holding period on a significant portfolio, the compounding effect of paying 15% rather than 30% on dividend income is meaningful.
Review your fund structure before it becomes a problem
If you are a non-US person holding US-domiciled ETFs, the estate tax exposure is live right now. A planning session is 30 minutes. We look at what you hold, explain what exposure exists, and tell you clearly what the correct structure is for your situation.
Book a Planning SessionDisclosure: bratucapital.com does not provide financial, investment or tax advice. It is specially designed to provide its users with general information. It does not give individual or specific advice on which products or services are the most appropriate for an individual’s particular circumstances. We may from time to time publish content on this site that has been created by affiliated or unaffiliated contributors. Bratu Capital is a trading name of NEBA Financial Solutions who are authorised by the Labuan Financial Services Authority & Regulated by the Monetary Authority of Singapore.
