Is SPUS Halal? The 2026 Shariah Verdict on the Largest US Halal ETF

What SPUS Is — and Why the Verdict Flips Versus XEQT

SPUS is the SP Funds S&P 500 Sharia Industry Exclusions ETF. It launched in December 2019, trades on NYSE Arca, and has grown into the largest US-listed halal equity ETF — roughly $2 billion in assets as of mid-2026. That scale matters: it means tight bid-ask spreads, deep liquidity, and a fund that is not going to quietly close on you.

Here is the part that flips the verdict. When we screened XEQT against the AAOIFI standard, it failed — because XEQT is an unscreened index fund that holds Canada's Big Six banks and the world's largest insurers outright. SPUS is the opposite: it is built from the ground up to exclude exactly those companies. It does not track the plain S&P 500. It tracks the S&P 500 Sharia Industry Exclusions Index — a version of the S&P 500 that S&P Dow Jones Indices runs through its Shariah screening engine before a single share lands in the fund.

So the question is not "does SPUS happen to avoid the banks?" It is "does SPUS's screening methodology hold up against the AAOIFI two-stage screen?" The short answer is yes, with one honest caveat about ratio thresholds that we will get to.

Applying the Two-Stage Screen to SPUS

Every "is X halal" ruling on this site runs the same two-stage screen: business activity first, then financial ratios. The strict global benchmark is AAOIFI Shari'ah Standard No. 21. SPUS's index uses the S&P Dow Jones Islamic Market (DJIM) methodology, which is the same screen with slightly looser ratio thresholds. Here is how SPUS does on each stage.

Stage 1: Business-Activity Screen — SPUS Passes

A company fails the business-activity screen if more than 5% of its revenue comes from conventional (interest-based) banking and insurance, alcohol, tobacco, gambling, pork, adult entertainment, or weapons. This is the stage that sinks every broad-market index fund — and it is the stage SPUS is built to pass. The S&P 500 Sharia Industry Exclusions Index removes those entire sectors before constructing the fund.

The business-activity screen is essentially identical between AAOIFI and S&P/DJIM. The companies that fail the halal/haram call most decisively — the conventional banks and insurers — are out of SPUS either way. This is the stage where SPUS earns the verdict.

Stage 2: Financial-Ratio Screen — SPUS Passes, With a Caveat

The second stage applies three financial-ratio tests to each surviving company. This is where SPUS's methodology diverges slightly from the strictest AAOIFI reading:

The difference is three percentage points on the debt and cash ratios, plus a trailing-average market-cap denominator instead of a point-in-time figure. In practice this means a small number of companies that pass S&P's 33% debt threshold might fail AAOIFI's stricter 30%. That is why the honest verdict is "SPUS is compliant under a recognized, board-supervised Shariah standard" rather than "SPUS is compliant under AAOIFI's single strictest possible reading." For the vast majority of investors following a mainstream screening methodology, SPUS clears the bar. If you require AAOIFI-exact ratios, verify the current holdings against Musaffa or Zoya, which apply the 30% thresholds directly.

What SPUS Actually Holds in 2026

Removing the entire financial sector from the S&P 500 does something predictable: it tilts the fund hard toward technology. The banks and insurers that normally balance the index are gone, so the mega-cap tech names rise to fill the space. As of mid-2026, SPUS held roughly 200 screened names, and the top holdings looked like this:

The top ten holdings make up well over half the fund. That concentration is the real trade-off with SPUS — not the Shariah compliance, which is sound, but the sector and single-name risk. You are buying a screened large-cap US equity fund that leans heavily on a handful of mega-cap technology companies. If those names correct, SPUS will fall harder than the parent S&P 500. That is the price of removing the financials: less balance, more tech.

SPUS vs the Other Halal Options for a Canadian

SPUS does not exist in a vacuum. For a Canadian investor building a halal portfolio, it competes with HLAL and Wealthsimple's managed Halal option. Here is the honest cost-and-coverage comparison.

SPUS is the cheapest of the three, and the largest fund by assets. HLAL is its closest substitute — both are US large-cap, board-screened, and tech-heavy after the financials come out; HLAL just pulls from the slightly broader FTSE Shariah USA universe at a marginally higher fee. Wealthsimple Halal costs roughly double but buys you hands-off management, automatic purification, and a built-in physical-gold sleeve. If you self-direct and want the lowest cost, SPUS wins on fee. For a fuller ranked comparison, see our best halal ETFs in Canada guide, and for the build-it-yourself screening logic, our are index funds halal explainer.

The Canadian Catch: US Withholding Tax and T1135

SPUS is US-listed and pays distributions in US dollars, which adds two Canada-specific layers on top of the Shariah verdict. Getting these wrong is the most common mistake we see Canadian halal investors make with US-listed funds.

Hold SPUS in your RRSP to avoid unrecoverable withholding tax

The US levies a 15% withholding tax on distributions paid to Canadian investors. Under the Canada-US tax treaty, that 15% is exempt inside an RRSP or RRIF — the IRS recognizes those as retirement accounts. But the TFSA, FHSA, and RESP are not treaty-recognized, so the 15% is withheld and cannot be recovered inside them. For a distribution-paying US-listed fund like SPUS, the RRSP is the most tax-efficient home. In a non-registered account, the 15% is creditable via the foreign tax credit, so it is not lost — but the RRSP is cleanest.

Watch the T1135 threshold

US-listed ETFs are "specified foreign property." If the total cost of your US-listed holdings — including SPUS — exceeds $100,000 CAD at any point in the year, you must file Form T1135 with your return. Holdings inside an RRSP, TFSA, or other registered plan are exempt from this filing, so SPUS held in registered accounts does not count toward the threshold. Only your non-registered US-listed holdings do.

The Purification You Still Owe

A common misread: "SPUS is screened, so I do not need to purify." That is wrong. Even a fully-screened fund earns a small slice of incidental impermissible income — trace interest on cash balances and a sliver of impure revenue from otherwise-compliant companies that sit just under the 5% threshold. AAOIFI methodology requires you to calculate that residual and donate it to charity. It is not deductible against your capital gains.

SP Funds makes this straightforward by publishing a quarterly purification figure and a purification calculator that covers SPUS. The amount is small — SPUS's 30-day SEC yield was about 0.39%, and only a fraction of that is impure — so on a $200,000 holding the annual purification figure is typically a modest dollar amount, not a meaningful drag. But it is part of holding the fund. Screening removes the haram holdings; purification cleanses the residual impure income. You do both.

Where SPUS Fits in a Full Halal Plan

SPUS is US large-cap only. There is no Canadian, international developed, or emerging-market exposure, and after the screen it leans heavily on a handful of mega-cap tech names. That is a strong US sleeve, not a complete portfolio. A more balanced halal build pairs SPUS with a global or international halal fund and a small allocation of individually-screened Canadian equities to dilute the single-country, single-sector concentration.

It also pairs naturally with the rest of a tax-sheltered Canadian plan. Inside a halal TFSA, remember the US-withholding trade-off — a US-listed fund like SPUS loses the 15% there, so many investors anchor the TFSA with Canadian-listed halal exposure and put SPUS in the RRSP. If you prefer a fully managed route, our Wealthsimple Halal review walks through the hands-off alternative, and for the broader market context our is the S&P 500 halal analysis explains why the unscreened index fails where SPUS passes. For the full menu of Shariah-compliant funds, the halal ETF hub ranks them by fee and screening.

The Honest Bottom Line

SPUS is halal. It is a purpose-built, board-supervised, transparently-screened fund that removes exactly the holdings — conventional banks, insurers, alcohol, tobacco, gambling, weapons, and high-debt companies — that sink unscreened index funds like XEQT and VFV. At a 0.45% expense ratio it is the cheapest mainstream halal equity option for a Canadian, and at roughly $2 billion in assets it is the most liquid.

The caveats are honest ones, not deal-breakers: its index uses the slightly looser S&P/DJIM 33% ratio thresholds rather than AAOIFI's 30%, so a handful of borderline holdings might not clear the strictest reading; it is US large-cap only and heavily concentrated in mega-cap tech; and you still owe a small annual purification. For a Canadian, the mechanics are simple: hold it in your RRSP to keep the 15% US withholding, watch the T1135 threshold on non-registered holdings, and run SP Funds' quarterly purification figure once a year. Verify the current holdings against Musaffa or Zoya before you buy, and you are investing in alignment with your values at the lowest cost the market currently offers.