Fund domicile for UAE investors: US dividend tax and estate tax

Every fund has a domicile: the country under whose law it is established. It sits on the factsheet beside the things people actually read — what the fund holds, and what it charges — and it is fixed by the fund, not by where the investor happens to live. For anyone investing from the UAE it has two consequences, and both of them are American.

The first is dividend tax. When a fund receives dividends from US companies, the US withholds tax before the money reaches the fund: 30% as standard, or a lower rate where the fund’s own country has an income tax treaty with the United States. Ireland’s treaty rate is 15%, so an Irish fund keeps 85% of its American dividends rather than the 70% a fund with no treaty behind it would keep. That gap is taken inside the fund, every year, before any return is measured.

The second is estate tax, which we covered in July. US-situated assets above $60,000 are exposed on a non-resident’s death, and shares in an Irish-domiciled fund are not US-situated even when everything inside the fund is American. The same holdings sit inside or outside that exposure depending on the wrapper around them.