The SPDR S&P 500 ETF Trust (SPY) is one of the most widely traded ETFs in the world. It tracks the S&P 500 Index, providing diversified exposure to 500 of the largest publicly traded companies in the United States.
However, for long-term Indian investors, SPY carries a critical structural risk: the US Estate Tax. If you hold US-domiciled assets like SPY and your holdings exceed $60,000, your estate faces US estate tax at progressive rates reaching 40% upon your death. On a $500,000 holding that works out to roughly 29% of the portfolio.
This blog gives you all the information you need about the top UCITS alternatives. These alternatives have similar underlying assets and track the same index, providing the same growth and exposure without the risk of the US Estate Tax.
Table of contents
- Why Indians are looking for UCITS alternatives to SPY
- Popular UCITS alternatives for SPY
- Invest in UCITS ETFs with Paasa
Why Indians are looking for UCITS alternatives to SPY
Indian investors are shifting to UCITS alternatives because they solve the tax risks and inefficiencies of US ETFs like SPY while providing the exact same exposure.
- Estate Tax Protection: UCITS funds are typically domiciled in Ireland. They are not considered "US-situs" assets, meaning they are 100% exempt from US Estate Tax.
- Tax Deferral (Accumulation): Unlike SPY, which forces taxable cash dividends on you, many UCITS funds offer "Accumulating" classes that reinvest dividends automatically. This defers your Indian tax liability until you sell the fund, and converts what would have been slab-rate dividend income into capital gains.
To learn more about UCITS ETFs and why Indian investors are choosing them, read our guide on UCITS ETFs.
Popular UCITS alternatives for SPY
Here are the top three UCITS funds that track the S&P 500.
1. Vanguard S&P 500 UCITS ETF
This is the European "twin" of SPY, managed by Vanguard. It holds the exact same underlying assets, the top 500 US companies, through physical replication.
It is among the most liquid S&P 500 options in Europe, making it suitable for investors who need tight spreads or who prefer receiving cash dividends.
- Ticker: VUSA (LSE)
- Total Expense Ratio (TER): 0.07%
- Structure: Distributing
- Top Holdings: NVIDIA, Apple, Microsoft, Amazon, Alphabet.
2. iShares Core S&P 500 UCITS ETF
For long-term Indian investors, this fund is often preferable to VUSA due to its Accumulating (Acc) structure.
Instead of paying out dividends (which would be taxed at your income slab in India), the fund uses that cash to buy more shares internally. This creates a compounding effect that significantly boosts net returns over a 10-20 year horizon.
- Ticker: CSPX (LSE)
- Total Expense Ratio (TER): 0.07%
- Structure: Accumulating (Reinvests dividends)
- Top Holdings: NVIDIA, Apple, Microsoft, Amazon, Alphabet.
3. Invesco S&P 500 UCITS ETF
This fund does not hold the index constituents. It uses a swap, an agreement with a counterparty to deliver the index return, backed by a substitute basket of shares.
Its headline ongoing charge is 0.05%, the lowest of the three, but that is not the full cost. Invesco's factsheet lists a separate swap fee of 0.07% a year and states that the total cost is the sum of the two, so the all-in figure is closer to 0.12%. Judge it on tracking difference against the index rather than on the headline charge.
The trade-off is counterparty risk. As Invesco's factsheet sets out, if the counterparty failed to pay, the fund would fall back on its substitute equity basket, which could return less than the index.
- Ticker: SPXS (LSE)
- Total Expense Ratio (TER): 0.05%
- Structure: Accumulating (Reinvests dividends)
- Replication: Synthetic, via swap with a substitute equity basket.
Invest in UCITS ETFs with Paasa
Paasa is a global investing platform designed for Indian investors. We provide direct access to over 10 global exchanges, including the United States, United Kingdom, Switzerland, Hong Kong, Germany, France, Canada, Netherlands, Japan, and Singapore.
This means you are not restricted to just US ETFs like the SPY; you can also buy tax-efficient UCITS equivalents using Paasa.
The Compliance Advantage
Paasa makes global investing easy and also removes the compliance friction with a specialized layer built specifically for Indian residents:
- Schedule FA Reporting: Exact reports you need for your Indian tax returns, eliminating the need for manual calculations.
- Tax Filing & Advice: Access to expert tax advice and seamless filing support.
- FEMA & LRS Integration: Guidance on FEMA regulations and LRS limits to ensure compliance.
Paasa also provides access to managed strategies, along with remittance, FEMA and tax advisory.
