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Where a fund lives

A fund’s home country is in the first two letters of its ISIN. It can change how much tax is lost on the way.

Read the code

Every fund has an ISIN, a 12-character code. It starts with the country the fund is set up in: IE for Ireland, LU for Luxembourg, FR for France, DE for Germany. Most ETFs sold across Europe live in Ireland or Luxembourg.

Why it matters

The US keeps part of every dividend it pays abroad. A fund in Ireland usually loses 15% of US dividends thanks to a tax treaty; a fund in Luxembourg usually loses 30%. The fund pays it; you never see it.

How much

If US shares pay dividends of 1.5% a year, losing 15% of them costs about 0.2 points a year, and losing 30% about 0.45. On the US part of a world fund, the gap is about 0.2 points a year: as much as a whole fee.

Where to see it

You cannot see this cost on the label. It shows in the tracking difference: two funds on the same index with the same fee can trail it by different amounts because of where they live.

Key takeaways

  • The ISIN’s first two letters say where a fund lives.
  • Home country changes how much US dividend tax is lost.
  • Compare tracking differences, not only fees.