If You Live Outside America and Own VOO, Your Family Could Lose Up to 40% of It to the US Taxman. Here’s the Simple Fix
Picture a man in Dubai, or Kuala Lumpur, or Lagos, or Manila. For fifteen years he does everything the experts say. Every month, no matter what the news says, he buys more VOO, the giant S&P 500 fund. He never panics. He never sells. By his late sixties, his account is worth US$500,000.
Then he dies. His wife logs in to the broker and finds the account frozen. A letter explains that nothing can be released until the US tax authority, the IRS, signs off. The bill, worked out with the IRS's own rate table, is about US$142,800.
He never lived in America. He never worked there. He may never have visited. It doesn't matter.
The short answer If you are not a US citizen and you live outside America, the US can charge estate tax on US assets you own when you die, including US-listed ETFs like VOO, SPY and IVV. Only the first US$60,000 is tax-free. Above that, rates climb from 18% to 40%. The simple fix for most people: hold the same S&P 500 through an Ireland-domiciled ETF instead, which the US does not treat as a US asset. |
The US$60,000 rule almost nobody tells you about
When an American dies in 2026, the first US$15 million of their estate is free of US estate tax. That figure was made permanent by the One Big Beautiful Bill Act and confirmed by the IRS in October 2025.
When you die, as a "nonresident alien" in IRS language, your allowance is US$60,000. Not US$60,000 per account. US$60,000 in total, across every US asset you own.
Technically, the law gives you a tax credit of US$13,000, which is exactly the tax on the first US$60,000. The result is the same. And unlike the American figure, this one is not adjusted for inflation, so it shrinks in real terms every single year.
What counts as a "US asset"?
The IRS calls them US-situs assets. For ordinary investors, the big ones are:
Shares of US companies, like Apple, Microsoft or Nvidia
US-domiciled ETFs and mutual funds, like VOO, SPY, IVV, VTI and QQQ
US real estate
US retirement accounts and certain US bonds issued by companies
The IRS's own guidance is blunt: shares in US companies are taxable even if you held them abroad, or in the name of a nominee. So buying VOO through a broker in Singapore, Hong Kong, Dubai or London does not change anything. The ETF itself is a US fund, so the asset is American.
How much could your family actually lose?
Here is where most websites get it wrong. Many say "40% of everything above US$60,000". That is not how the tax works. Like income tax, it rises in steps, from 18% on the first slice to 40% on everything above US$1 million.
I ran the numbers using the IRS rate schedule for Form 706-NA, with the US$13,000 credit, for someone in a country with no estate tax treaty with the US:
US shares and ETFs at death | US estate tax bill | Share of your holding lost |
|---|---|---|
US$60,000 | US$0 | 0% |
US$100,000 | US$10,800 | 10.8% |
US$250,000 | US$57,800 | 23.1% |
US$500,000 | US$142,800 | 28.6% |
US$1,000,000 | US$332,800 | 33.3% |
US$2,000,000 | US$732,800 | 36.6% |
So the "up to 40%" in the headline is the rate on the top slice. On a US$1 million holding, the bill is one-third. On US$2 million it is getting close to 37%. Either way, these are life-changing sums for a widow, a son or a daughter.
Why this hurts more than the tax itself The tax is due within nine months of death, on Form 706-NA. Until the IRS issues a "transfer certificate" saying the tax is settled, US brokers and banks are allowed to refuse to release the account. Practitioners report the paperwork can take a year or more. Your family may need to pay lawyers and accountants in a foreign country, in a foreign language, while grieving. |
The family who learned this the hard way
This is not a scare story invented by fund salesmen. It has been fought out in court.
Mr and Mrs Charania were born in Uganda to parents of Asian descent and were British citizens. In 1972, the dictator Idi Amin expelled Asians from Uganda, and they lost everything they owned there. They rebuilt their lives in Belgium and prospered.
When Mr Charania died in January 2002, he owned 250,000 shares of Citigroup, worth about US$11.8 million on the day he died. According to a US law firm's review of the case, there is no public evidence he ever set foot in America.
His estate filed a US estate tax return. The family argued that half the shares belonged to his widow under Belgian law. The IRS disagreed and demanded more than US$2 million in tax and penalties. In 2009, the US Tax Court sided with the IRS (Estate of Charania v. Commissioner, 133 T.C. 7).
Notice what did not matter: his British passport, his Belgian home, the fact that he never lived in the US. What mattered was that he owned shares in an American company, and Belgium has no estate tax treaty with the United States.
Four myths that leave families exposed
Myth No. 1: "My broker is in my own country, so I'm safe."
The location of the broker doesn't matter. The IRS looks at what you own, not where it sits. A US-domiciled ETF is a US asset everywhere in the world.
Myth No. 2: "The IRS will never find out."
Banks and brokers that hold US assets can be held liable if they hand over a dead client's US assets before the tax is cleared. So many simply freeze the account until the family produces the IRS transfer certificate. The broker becomes the enforcer.
Myth No. 3: "I'll just give my shares to my children before I die."
There is a real planning point here. A non-American's gift of shares is generally not hit by US gift tax. But timing your own death is not a plan, and gifting large sums has its own family and tax consequences at home. Treat it as an advanced strategy for a qualified adviser, not a do-it-yourself fix.
Myth No. 4: "I'm too small for this to matter."
US$60,000 is small. If you invest US$500 a month into VOO and the market does what it has done historically, you can cross that line within a decade. I show what US$500 a month can grow into in this guide. The better your investing goes, the bigger the trap becomes.
Which countries are hit hardest?
The United States has estate tax provisions in treaties with only 15 countries, according to the IRS. If you are domiciled in one of them, the treaty may shrink or wipe out the bill, but your family usually still has to file a US return to claim the relief.
Treaty countries (relief may apply) | No treaty (the full US$60,000 rule) |
|---|---|
Australia, Austria, Canada (inside the income tax treaty), Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Netherlands, South Africa, Switzerland, United Kingdom | Most of the world, including Malaysia, Singapore, Hong Kong, China, Taiwan, South Korea, India, Indonesia, the Philippines, Thailand, Vietnam, the UAE, Saudi Arabia, Nigeria, Kenya, Brazil, Mexico, Argentina and New Zealand |
A few examples of how different the outcome can be:
Canada: The treaty gives Canadians a share of the American US$15 million allowance, in proportion to how much of their wealth is in the US. Canadian accounting firms note that if a Canadian's worldwide estate is under the US$15 million threshold, generally no US estate tax is due.
Germany and France: Treaty updates give residents a similar "pro-rata" share of the American allowance.
Malaysia, Singapore, the UAE, Nigeria, Brazil and the rest of the "no treaty" world: no relief at all. The plain US$60,000 rule applies, and the full rate table bites.
People in the UK and the European Union are often protected by accident. European rules on investor documents mean most local brokers don't even sell US-listed ETFs to retail investors, so many already own European versions.
The people most exposed are investors in Asia, the Middle East, Africa and Latin America who followed the internet's favourite advice: "Just buy VOO."
The simple fix: same S&P 500, different wrapper
Here's the good news. You don't have to give up the S&P 500. You just need to own it through a fund that isn't American.
Several of the world's biggest fund companies run S&P 500 ETFs that are domiciled in Ireland under the European "UCITS" rules. They hold the same 500 American companies. But because the fund itself is an Irish company, the IRS does not treat your shares in it as a US asset. No US estate tax. No Form 706-NA. No transfer certificate.
VOO (US-domiciled) | CSPX (Ireland) | VUAA (Ireland) | |
Tracks | S&P 500 | S&P 500 | S&P 500 |
US estate tax risk for non-Americans | Yes, above US$60,000 | No | No |
US tax on dividends (no-treaty investor) | 30% | 15% at fund level | 15% at fund level |
Dividends | Paid out to you | Reinvested automatically | Reinvested automatically |
Annual fee | about 0.03% | about 0.07% | 0.07% |
Main listing | New York | London | London |
Fees and listings can change. Check each fund's own factsheet before buying.
The bonus nobody expects: lower dividend tax
If you live in a country without an income tax treaty with the US (Malaysia, Singapore, Hong Kong and the UAE are examples), the US keeps 30% of every dividend VOO pays you. An Ernst & Young tax leader told The Edge Malaysia this in March 2026, noting simply that "Malaysia has no tax treaty with the US."
An Irish fund pays only 15% on the dividends it receives, thanks to the US–Ireland tax treaty. And Ireland does not add its own tax for investors who don't live there.
"But the fee is higher!"
Yes, by roughly 0.04% a year. On a US$500,000 portfolio, that is about US$200 a year.
Now compare. If the S&P 500 yields around 1.2% in dividends, US$500,000 earns about US$6,000 a year. The difference between 30% and 15% withholding on that is about US$900 a year in the Irish fund's favour. Then there is the estate tax: up to US$142,800 saved on that same portfolio.
Real-world results back this up. The Edge Malaysia compared Vanguard's US-listed S&P 500 ETF with its Irish twin from 2013 to 2024. The Irish fund's cumulative return was slightly higher: about 183.9% against 180.7%.
The one-line takeaway For most investors outside America, an Irish-domiciled S&P 500 ETF gives you the same companies, lower dividend tax and no US estate tax, for a fee difference of a few hundred dollars a year. |
The 60-second test: is your fund American?
You don't need to read a prospectus. Look up your fund's ISIN, the 12-character code every fund has. Your broker shows it, and so does the fund company's page.
Starts with US (VOO is US9229083632): a US fund. US estate tax applies.
Starts with IE (CSPX is IE00B5BMR087, VUAA is IE00BFMXXD54): an Irish fund. No US estate tax.
Starts with another country code: check that country's estate tax rules and the fund's documents.
This test catches a sneaky trap too. Some ETFs listed on stock exchanges outside America are really units of a US-domiciled fund. If the ISIN starts with "US", it's American, wherever it trades.
How to switch without making a costly mistake
If you decide to move, do it calmly. The goal is to remove the risk, not to create new ones.
List every US asset you own. Add up US-listed ETFs, individual US shares and anything else. If the total is near or above US$60,000, keep reading.
Check your home country's capital gains rules. The US does not tax non-residents' capital gains on shares (unless you spend 183 days or more there in a year). But your own country might. Malaysia, Singapore, Hong Kong and the UAE generally don't tax individuals on investment gains. The UK, Australia, Canada and India do. If a sale would trigger a big tax bill at home, speak to a local tax adviser first.
Confirm your broker can buy London-listed ETFs. Many international brokers can. Choose the US dollar line if you want to avoid currency conversion.
Pick accumulating or distributing. If you don't need the income, an accumulating fund (like CSPX or VUAA) reinvests dividends for you. If you live off dividends, choose a distributing version.
Sell and buy on the same day. This keeps you invested. Trying to "wait for a better price" turns a tax decision into market timing, which is how good investors make bad mistakes. My guide on lump sum or monthly investing explains why.
Point new monthly money to the Irish fund. Even if you keep some VOO for now, stop adding to the problem.
Write it down for your family. Tell your spouse or children which broker you use, how to reach them, and where your will is.
Other ways to protect your family
The Irish ETF route is the simplest fix for most people. But there are others, each with trade-offs.
Stay under US$60,000 in US assets. Fine for small portfolios, but it gets harder every year your investments grow.
Hong Kong-domiciled S&P 500 ETFs. The Edge Malaysia points out these avoid US estate tax because Hong Kong has no estate tax, though dividends still lose 30% to US withholding. Useful if you can't reach European exchanges.
Life insurance sized to the tax. Life insurance paid out on a non-American's death is not a US asset, so it can give your family cash to pay the bill and release the shares.
Holding companies and trusts. A properly built non-US company or trust can hold US shares outside your personal estate. This needs a professional, costs money every year, and is usually worth it only for larger portfolios.
If you own US property, a US business or several million dollars in US assets, pay a qualified cross-border estate lawyer. The money saved can be enormous.
What to do tonight
Open your broker app and add up your US-listed holdings.
Look up the ISIN of each ETF. Note which start with "US".
Write a short note for your family: broker name, login help, and where your will is.
If you're above US$60,000, decide whether to switch new contributions to an Irish S&P 500 ETF, and book a chat with a tax adviser if selling would trigger tax at home.
If you're still deciding which fund suits you best, my guide on how to invest in the S&P 500 if you live outside the United States walks through the options, and Malaysian readers can follow my step-by-step guide for Malaysia. Worried about the fund company itself? Read what happens if Vanguard goes bankrupt. And remember: you only need one or two good funds, as I explain in how many index funds should you own.
Frequently asked questions
Do non-US residents pay US estate tax on VOO?
Yes, if they are not US citizens and not domiciled in the US. VOO is a US-domiciled ETF, so it counts as a US-situs asset. If your total US assets exceed US$60,000 at death, your estate must file Form 706-NA and may owe tax at rates from 18% to 40%, unless a treaty gives relief.
What is the US estate tax exemption for non-residents in 2026?
Effectively US$60,000 of US-situs assets, through a US$13,000 tax credit. It is not adjusted for inflation. US citizens and residents get US$15 million in 2026. Residents of the 15 treaty countries, such as Canada, Germany or Japan, may get a larger allowance under their treaty.
Are Irish-domiciled ETFs like CSPX and VUAA subject to US estate tax?
Generally no. A non-American's shares in an Ireland-domiciled UCITS ETF are shares in an Irish company, not a US company, so they are not US-situs assets. Ireland also does not charge its inheritance tax to investors who are neither resident nor domiciled there.
Does it matter where my broker is located?
No. The IRS looks at what you own, not where the account is. The IRS says shares in US companies are taxable even if the certificates are held abroad or in a nominee's name. VOO bought through a broker in Singapore, Dubai or London is still a US asset.
Will my family be able to access my US shares after I die?
Not straight away if your US assets exceed US$60,000. US custodians can insist on an IRS transfer certificate before releasing them. That requires filing Form 706-NA and settling any tax first, which practitioners say can take many months or more than a year.
Should I sell VOO and buy an Irish S&P 500 ETF?
For many investors outside the US, switching removes the estate tax risk and lowers dividend tax for a small fee difference. But check first whether selling triggers capital gains tax in your home country, and whether your broker can buy London-listed ETFs. This is general education, not personal advice.
Are US bank deposits subject to US estate tax for non-residents?
Ordinary US bank deposits held for personal use, and not connected with a US business, are generally treated as outside the US for estate tax. Certain qualifying debt, such as portfolio-interest bonds, is also excluded. Shares and US-domiciled funds are the main trap.
About the author
Stephen Loke has been a student of the market for more than 15 years. He is also an agritourism entrepreneur whose farm has been featured in Bloomberg News and Asahi Shimbun.
This article is general education, not personal financial, tax or legal advice. I'm not a licensed financial adviser or tax professional. Tax rules change and depend on your country and circumstances, so speak to a qualified adviser before acting.
You worked hard for every dollar in that account. You sat through the crashes. You kept buying when everyone around you was scared. That discipline deserves to end up with the people you love, not with a tax office in a country you never lived in.
The fix is not complicated. It just has to be done before it's needed.
If you've lost money in the market before and want to understand why it happened, and how to build wealth calmly from here, my free 38-page report shows you.
Sources
IRS: Some nonresidents with US assets must file estate tax returns
IRS: Tax inflation adjustments for 2026, including the One Big Beautiful Bill
Cornell Law: 26 CFR 20.6325-1, transfer certificates in nonresident estates
Berliner Cohen: The Charania estate and the long arm of the IRS (2022)
The Edge Malaysia: Navigating taxation in global investing (March 2026)
US Treasury: US–Germany estate tax protocol, pro-rata unified credit
Raymond Chabot Grant Thornton: Canadian residents and US estate tax (2026)
Barclay Damon: Transfer certificates and direct beneficiaries (2025)
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