Základy ETF
Why UCITS ETFs and the Irish domicile
Key takeaways
- UCITS is a European fund regulation; American ETFs (SPY, VOO, QQQ) cannot be bought by retail investors in the EU.
- Instead you buy their UCITS "twins" tracking the same index.
- The most advantageous domicile is Ireland — only 15 % withholding on US dividends and no additional Irish withholding.
- You can identify an Irish fund by its ISIN, which starts with the letters "IE".
- Look for a broad, low-cost (low TER) and large (high AUM) Irish UCITS ETF.
When you start investing in equity indices in the Czech Republic, you quickly come across the abbreviation ETF (Exchange Traded Fund) — an exchange-traded fund that tracks an index, such as the S&P 500. You buy one share and indirectly own a small slice of hundreds of companies. But not every ETF is available to European investors.
What UCITS is and why it matters
UCITS is a European fund regulation. It emphasises diversification, the separation of investors' assets and, above all, a mandatory information document called the KID. Famous American ETFs such as SPY, VOO or QQQ do not have this European document — which is why a European retail broker cannot normally sell them to you. Instead, UCITS equivalents of these funds exist, tracking the same index (for example CSPX or VUSA for the S&P 500).
The magic of the Irish domicile
UCITS funds have a "domicile" — the country where they are legally established. For a Czech investor (and any investor in the EU), Ireland is the most advantageous. The reason is tax:
- Ireland has a tax treaty with the USA under which the withholding tax on US dividends inside the fund is only 15 % instead of the standard 30 %.
- Ireland itself charges no withholding tax on distributions from the fund to a foreign investor.
This eliminates one entire layer of taxation — what is commonly called "double taxation". For the competing Luxembourg domicile, the situation is usually less favourable for US equity exposure.
Key takeaway
Look for a broad, low-cost (low TER) and large (high AUM) UCITS ETF with an Irish domicile. The ETF overview lists only Irish-domiciled funds — from S&P 500 through NASDAQ and semiconductors to dividend strategies. Simply choose based on whether you want growth or income.
FAQ
Why can I not buy SPY or VOO?
They do not have the European KID information document required under PRIIPs regulation, so retail brokers in the EU are generally not permitted to offer them.
What does the domicile of a fund mean?
The country where the fund is legally established. It primarily affects the taxation of dividends inside the fund — which is why Ireland is sought after.
Is the Irish domicile better than the Luxembourg domicile?
For US equities, generally yes, owing to the advantageous tax treaty between the USA and Ireland.