TD Direct Investing provides access to mutual funds that may help you defer and pay less tax on your non-registered investments.
What is a Corporate Class fund?
Corporate Class is a mutual fund family set up within a corporate structure. Each fund is offered as a different class of shares in the corporation. For income tax purposes, the corporation can use deductible expenses incurred across all share classes to offset income earned in the form of interest or foreign source dividends. Canadian source dividends are distributed to shareholders in the form of Canadian dividends and realized capital gains are distributed in the form of capital gains dividends.
How are distributions taxed?
Any fund distributions received from a corporate class fund are in the form of eligible Canadian dividends or capital gains which are taxed at a lower rate than interest income, when received by Canadian resident holders. Certain series also pay distributions in the form of Return of Capital which may help defer taxes. (For further discussion on Returns of Capital, see section on Cash Flow Solutions – H-Series mutual funds).
Is Corporate Class right for you?
Do you recognize yourself in any of the following scenarios? If so, you may benefit from a Corporate Class mutual fund solution:
- • I have maximized my RSP and TFSA and am looking for tax-effective investment opportunities
- • My company pension plan limits my RSP contributions