Fund domicile

Two ETFs track the same index, charge the same fee, come from equally reputable providers — and deliver different returns, permanently. The difference is not skill. It is a treaty signed by governments, applied automatically, and printed in the fund’s legal domicile.

The mechanism: when a US company pays a dividend to a foreign fund, the US withholds tax at source. How much depends on the treaty between the US and the fund’s country — not yours. Funds domiciled in Ireland benefit from a favourable US treaty rate; comparable Luxembourg structures typically suffer a higher one. The gap repeats on every dividend, every year, compounding silently in the tracking difference — which is exactly where you can see it without reading a single treaty: Irish-domiciled US-equity ETFs systematically track closer to the index.

How to check: the first two letters of the ISIN give the domicile (IE for Ireland, LU for Luxembourg), and the fund name usually repeats it. For US equity exposure held from Europe, this single check is worth more than most fee negotiations — the numbers, with sources, are in the article below.

Educational context, not tax advice: personal tax treatment on top of the fund layer differs by country and situation.