Nonresident alien's ETF domicile decision table

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When selecting an index tracking fund, US nonresident alien investors have a broad choice between US domiciled ETFs and non-US domiciled ETFs. This page summarises the recommended ETF domicile that US nonresident aliens might use, based on their own country of residence and domicile. The goal is for investors to obtain the best tax result.

ETF domicile recommendations table

Find your country of residence and domicile in the table below to help you decide whether US domiciled ETFs or non-US domiciled ETFs are likely to be the best ones for you to use for your own investing.

ETF domicile recommendations by country of residence and domicile
Holdings below $60,000 Holdings above $60,000
Country of residence/domicile Treaty article US dividend tax rate Estate tax treaty? US domiciled ETFs Non-US domiciled ETFs US domiciled ETFs Non-US domiciled ETFs
Australia 10(2)/P6 15% Yes Consider Consider Consider Consider
Austria 10(2) 15% Yes Consider Consider Consider Consider
Bangladesh 10(2) 15% No Consider Consider Avoid Prefer
Barbados 10(2)/PIII(1) 15% No Consider Consider Avoid Prefer
Belgium 10(2) 15% No Consider Consider Avoid Prefer
Bulgaria 10(2) 10% No Prefer Avoid Avoid Prefer
Canada X(2)/5P5(1) 15% Yes Consider Consider Consider Consider
China, People's Rep. of 9(2) 10% No Prefer Avoid Avoid Prefer
Comm. of Independent States None 30% No Avoid Prefer Avoid Prefer
Cyprus 12(2) 15% No Consider Consider Avoid Prefer
Czech Republic 10(2) 15% No Consider Consider Avoid Prefer
Denmark 10(2)/PII 15% Yes Consider Consider Consider Consider
Egypt 11(2) 15% No Consider Consider Avoid Prefer
Estonia 10(2) 15% No Consider Consider Avoid Prefer
Finland 10(2)/PIII 15% Yes Consider Consider Consider Consider
France 10(2)/2P2 15% Yes Consider Consider Consider Consider
Germany 10(2)/PIV 15% Yes Consider Consider Consider Consider
Greece IX 30% Yes Avoid Prefer Avoid Prefer
Hungary 9(2) 15% No Consider Consider Avoid Prefer
Iceland 10(2) 15% No Consider Consider Avoid Prefer
India 10(2) 25% No Avoid Prefer Avoid Prefer
Indonesia 11(2)/P1 15% No Consider Consider Avoid Prefer
Ireland 10(2) 15% Yes Consider Consider Consider Consider
Israel 12(2) 25% No Avoid Prefer Avoid Prefer
Italy 10(2) 15% Yes Consider Consider Consider Consider
Jamaica 10(2)/P2 15% No Consider Consider Avoid Prefer
Japan 10(2) 10% Yes Prefer Avoid Prefer Avoid
Kazakhstan 10(2) 15% No Consider Consider Avoid Prefer
Latvia 10(2) 15% No Consider Consider Avoid Prefer
Lithuania 10(2) 15% No Consider Consider Avoid Prefer
Luxembourg 10(2) 15% No Consider Consider Avoid Prefer
Malta 10(2) 15% No Consider Consider Avoid Prefer
Mexico 10(2) 10% No Prefer Avoid Avoid Prefer
Morocco 10(2) 15% No Consider Consider Avoid Prefer
Netherlands 10(2)/P3(a) 15% Yes Consider Consider Consider Consider
New Zealand 10(2)/PVI 15% No Consider Consider Avoid Prefer
Norway 8(2)/P1V(1) 15% Yes Consider Consider Consider Consider
Pakistan VII(2)/VI(1) 30% No Avoid Prefer Avoid Prefer
Philippines 11(2) 25% No Avoid Prefer Avoid Prefer
Poland 11(2) 15% No Consider Consider Avoid Prefer
Portugal 10(2),(3) 15% No Consider Consider Avoid Prefer
Romania 10(2) 10% No Prefer Avoid Avoid Prefer
Russia 10(2) 10% No Prefer Avoid Avoid Prefer
Slovak Republic 10(2) 15% No Consider Consider Avoid Prefer
Slovenia 10(2) 15% No Consider Consider Avoid Prefer
South Africa 10(2) 15% Yes Consider Consider Consider Consider
South Korea 12(2) 15% No Consider Consider Avoid Prefer
Spain 10(2) 15% No Consider Consider Avoid Prefer
Sri Lanka 10(2) 15% No Consider Consider Avoid Prefer
Sweden 10(2)/P1V 15% No Consider Consider Avoid Prefer
Switzerland 10(2) 15% Yes Consider Consider Consider Consider
Thailand 10(2) 15% No Consider Consider Avoid Prefer
Trinidad & Tobago 12(1) 30% No Avoid Prefer Avoid Prefer
Tunisia 10(2) 20% No Avoid Prefer Avoid Prefer
Turkey 10(2) 20% No Avoid Prefer Avoid Prefer
Ukraine 10(2) 15% No Consider Consider Avoid Prefer
United Kingdom 10(2) 15% Yes Consider Consider Consider Consider
Venezuela 10(2) 15% No Consider Consider Avoid Prefer
Other Countries None 30% No Avoid Prefer Avoid Prefer

Notes

Recommendations explained

The table above offers recommendations for holdings below $60,000 and above $60,000. This is because for US nonresident aliens domiciled in countries without a US estate tax treaty, US estate taxes begin at a miserly $60,000 of aggregate US situated investments, and rapidly rise to 40% of the balance.

Because of the threat of extortionate US estate taxes, if you live in a country without a US estate tax treaty you should avoid US domiciled ETFs where the balance exceeds $60,000, and strongly prefer non-US domiciled ETFs instead.

Ireland is the most common domicile for non-US domiciled ETFs, although Luxembourg is another popular non-US domicile for ETFs. Of the two, Ireland has the better treatment for dividends from US stocks. ETFs domiciled in Ireland can take advantage of the US/Ireland treaty rate of 15%, but because of a less favourable US treaty ETFs domiciled in Luxembourg suffer 30% tax withholding on dividends from US stocks. In general then, if avoiding US domiciled ETFs you should prefer Ireland domiciled ETFs over Luxembourg domiciled ones unless the ETF itself holds no US stocks.

If your country has a US income tax treaty, and if it also has a US estate tax treaty or where your US ETF holdings balance will always be below $60,000, and if your country's US tax treaty rate is lower than the US/Ireland treaty rate of 15%, you may generally prefer US domiciled ETFs. If however your country's US tax treaty rate is higher than the US/Ireland tax treaty rate, you should prefer Ireland domiciled ETFs.

If your country's US tax treaty rate equals the US/Ireland tax treaty rate of 15%, you can consider either US or non-US domiciled ETFs, although you should restrict investments in US domiciled ETFs to below $60,000 if your country does not have a US estate tax treaty. Choosing the best ETF domicile in this case will usually be decided by a combination of how local tax laws treat 'offshore' funds, whether and how they provide foreign tax credits, and any large differences in the ETF annual charges.

If you live in a country with neither a US income tax treaty nor a US estate tax treaty you should strongly avoid US domiciled ETFs and strongly prefer non-US domiciled ones. For you, choosing US domiciled ETFs will probably lead to poor tax results all round.

Specific country notes

There is no US tax treaty with Hong Kong and it is not covered by the treaty with China. The tax treaty with Chile was executed in 2010 but has still not been ratified by the US senate, and so has not entered into force.

The US estate tax treaty with Switzerland may not protect against potential double-tax on US situated assets, but Swiss investors are probably protected up to the level of the US estate tax exemption allowed to US citizens.

The Ireland estate tax treaty is very old, and unlike other US estate tax treaties it may not raise the US estate tax exemption to the level allowed to US citizens. Irish investors should check this carefully before proceeding.

Canada does not have a separate estate tax treaty with the US. Instead, the US maintains a single treaty with Canada that combines both income taxes and estate taxes. Under this combined treaty, Canadians receive protection up to the level of the US estate tax exemption allowed to US citizens, the same as generally provided by the separate US estate tax treaties for other countries.

Residence and domicile

US income tax treaties treaties are generally controlled by your country of residence. Being a 'tax resident' of a country is normally sufficient to allow you to use that country's income tax treaty with the US.

In contrast, US estate tax treaties are generally controlled by your domicile rather than your country of residence. Domicile is where your permanent home is, and although it includes residence as one of its elements, residence alone in a country may not be enough to gain you coverage from a US estate tax treaty, so you may need to be particularly careful here. A few US estate tax treaties also cover citizens even when perhaps not resident in the treaty partner country, for example the UK.

See also