Tax Matters

This information is intended only for Canadian residents holding mutual fund trust units in a non-registered account. If you have not yet purchased mutual fund trust units, you should seek independent tax advice before doing so. Investors in mutual fund trusts are strongly advised to seek their own independent tax advice regarding their investments. If you have any questions regarding the tax forms, please contact your tax advisor.

General Information

Understanding how your investments are taxed is an important part of developing an effective investment portfolio. This guide provides general tax information related to the purchase and sale of funds structured as trusts in a non-registered account.

What is a mutual fund?

The majority of funds in Canada are structured as trusts. Investors in such funds receive units of the trust and are referred to as unitholders.Money received by the fund from unitholders who purchase units is pooled together with that of other unitholders and the resulting pool of money is managed by a portfolio manager. The portfolio manager buys and sells securities on behalf of the unitholders in the fund. The securities purchased depend on the fund’s investment objective and strategies; examples include, but are not limited to, cash, bonds and stocks of particular companies, private and public debt and real estate. These investments may generate income in the form of interest or dividends. In addition, capital gains or losses may be realized when securities held in the fund are sold including changes in foreign exchange rates applicable to foreign investments sold by the fund.

This guide provides general tax information related to the purchase and sale of funds structured as trusts in a non-registered account.

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Income tax considerations and consequences

This document discusses the impact of taxation on funds held in non-registered accounts. Funds held within registered plans, such as TFSAs, RRSPs, RRIFs and RESPs, are not subject to tax until money is withdrawn.

When do I pay taxes on my fund investments?

Generally, tax considerations related to your fund investments can be grouped into two categories:

• Taxes associated with selling or switching units of a fund.
• Taxes related to the distributions received from a fund.