Are you looking for another tax-advantaged way to save and invest?
With RBC Corporate Class Funds, you can get the value, choice and transparency of RBC Funds and PH&N Funds in a more tax-efficient structure. There are three ways to pay less tax on your investments held outside of a registered plan.
- Tax-free switching between funds
- Reduced taxable distributions
- Generate tax-deferred distributions
RBC Corporate Class Funds include a comprehensive range of funds across various asset classes.
Update regarding 2016 Federal Budget and RBC Corporate Class Funds
The 2016 Federal Budget proposes to amend the Income Tax Act so that a switch between classes of shares of a mutual fund corporation will be considered to be a disposition at fair market value for tax purposes. The change will not apply to switches between different series of the same share class.
The change is expected to take effect beginning on October 1, 2016. Until then, RBC Corporate Class Funds (the Funds) will continue to operate in the same manner as prior to the budget announcement.
Shareholders of the Funds may wish to speak with their financial advisor about their investment options. For more information, including a list of impacted Funds, please refer to the press release.
Tax-free switching between funds
With RBC Corporate Class Funds, you can switch between funds with no tax cost, which is possible because each fund is a class of shares in a single mutual fund corporation. Switching from one class of shares to another class in the same corporation is not a taxable disposition.
As long as you stay in funds under the RBC Corporate Class Funds umbrella, you’ll defer tax on gains when you switch between funds. Of course, when you eventually redeem out of the corporation you’ll pay tax on any gains you realize – just like any other investment. The ability to defer tax payments for long periods is a valuable benefit of RBC Corporate Class Funds because more of your money stays invested and working for you.
To learn more about the investment solutions available through RBC Corporate Class Funds, please speak with your advisor or click on Invest Now for options on how to contact us.
Reduced taxable distributions
Compared to standard mutual fund trusts, RBC Corporate Class Funds give you an opportunity to pay less tax on income earned inside of a fund.
RBC Corporate Class Funds can manage the taxable income and deductions generated by all of the funds under its corporate structure. The losses or expenses in one fund can be used to shield taxable income in another fund, which is how RBC Corporate Class Funds can help reduce the taxable distributions you receive.
Generate tax-deferred distributions
If you’re looking to draw a steady stream of tax-efficient cash flow from your non-registered investments, RBC Corporate Class Funds in Series T5 (Series T5) are designed to minimize taxable income and provide tax-deferred monthly distributions in the form of return of capital. Unlike interest and dividend income, return of capital distributions are generally not taxable until your investment in RBC Corporate Class Funds is sold.
Flexible cash flow from 0% to 5% with Series T5
Series T5 funds enable you to customize and adjust your payout rate to suit your income needs without triggering taxes. You can customize monthly cash flow anywhere from 0% to 5% annually by allocating your investment amount between Series T5 and another Series of the same fund or any other RBC Corporate Class Fund. If you want to adjust your payout rate over time, rebalancing between Series T5 and other RBC Corporate Class Funds doesn’t trigger taxes.
What is return of capital?
Return of capital is a tax term used to describe distributions in excess of a fund’s earnings. For tax purposes, return of capital represents a return to the investor of their own capital. The inclusion of return of capital in a distribution doesn’t indicate whether the fund has gained or lost value. Series T5 are designed to minimize taxable income and pay out tax-deferred return of capital, but may distribute some taxable dividends and/or capital gains.
Are RBC Corporate Class Funds right for you?
- Are you looking for tax-efficient investments outside of your registered plans (e.g. RRSPs or TFSAs )
- Do you want to be able to rebalance your holdings without worrying about tax consequences?
- Do you plan to adjust your holdings to take advantage of market trends over time?
- Would you like the opportunity to reduce taxable distributions from your mutual funds?
- Are you a parent or grandparent setting up an in-trust account for a minor child?
- Do you plan to make charitable contributions with this investment?
If you answered yes to any of these questions, please talk to your advisor or click on Invest Now for options on how to contact us to determine if RBC Corporate Class Funds are right for you.