Fidelity Tax-Smart Solutions™


Whether you’re trying to build savings during your working years or access those savings later in retirement, tax-smart solutions are an important part of your financial plan.

When it comes to non-registered investing, tax efficiency is half of the equation. The other half is investment quality.

At Fidelity, we don’t make you choose one over the other.

Read the video transcript pdf


Corporate class

What is corporate class?

During the years leading up to retirement, you’ll want to make sure your savings have good growth potential. Fidelity Corporate Class offers tax-deferred growth through the potential for reduced taxable distributions, which means more money staying in your account to grow.




How does it work?

  • Class funds are held inside a mutual fund corporation and treated as a single entity for tax purposes, providing additional tax benefits for investors. Because corporate class funds can’t distribute higher taxed interest or foreign income, taxes are minimized or deferred, leaving more money to benefit from compound growth.

Who is it for?

  • Individual investors with non-registered investments, including those who have used up their RRSP and TFSA contribution room and seek a steady stream of cash flow in the future or in retirement (using T-Class).
  • Retirees needing tax-efficient cash flow and to reduce the Old Age Security (OAS) clawback.
  • Owner-managed corporations seeking a tax-efficient option for after-tax profits.
  • Charitable giving with Fidelity Tax-Smart CashFlow™ allows philanthropists to receive cash flow payments from investments while donating to a worthy cause in a tax-efficient way.
  • Those wanting to create trust accounts for children or grandchildren.



Fidelity Tax-Smart CashFlow

What is Fidelity Tax-Smart CashFlow?

When you’re ready to start reaping the benefits of your investments, you’ll need to consider the tax implications around accessing your non-registered savings. Tax-Smart CashFlow can be combined with corporate class to offer even greater tax efficiency (T-Class).




How does it work?

  • T-Class provides cash flow by returning an investor’s original investment principal in a return of capital (ROC). This amount is not taxable, because the investor already paid tax on it before the investment was made.
  • A return of capital will reduce the adjusted cost base (ACB) of class fund shares held. Once all of an investor’s capital has been returned, the subsequent cash flows will be treated as capital gains and taxed at a lower rate than other sources of income.
  • Investors can receive tax-efficient monthly cash flow without having to sell investments, meanwhile deferring capital gains.

Who is it for?

  • Tax-Smart CashFlow and T-Class offer the flexibility to develop customizable and sustainable solutions by generating tax-efficient cash flow for those in their retirement and wealth preservation years.

With Tax-Smart CashFlow and T-Class, you can

  • receive tax-efficient monthly cash flow, and customize cash flow payout rate or amount (up to 8%) without triggering capital gains tax
  • turn cash flow on or off, or adjust it according to your needs
  • reinvest cash flow, shifting asset allocation over time without triggering capital gains
  • transfer wealth to a charity in a tax-smart way

Related reading:




Enhancing the tax efficiency of charitable giving

Donations to a charity are a great way to give back. The value of a donation (whether cash or “in-kind”) is used to determine a tax credit, saving taxes for the donor.

Charitable giving with Tax-Smart CashFlow allows you to receive tax-deferred cash flow payments from your investments and donate to a worthy cause in a tax-efficient way.

Learn more about charitable giving strategies



 


Tax-smart tools

Fidelity Tax-Smart CashFlow™ calculator

Check how much monthly cash flow you could receive from your Tax-Smart CashFlow investment, and estimate your current tax bill.

Fidelity tax calculator

Estimate your year-end tax balance based on your total income and total deductions.

According to a proposed change in the Canadian federal tax rules, effective January 1, 2017, switching shares of a class fund to shares of another class fund within a mutual fund corporation will be deemed a disposition at fair market value for tax purposes and will trigger a capital gain or loss. The proposal does not apply to switches between different series of the same class fund.

This information is for general knowledge only and should not be interpreted as tax advice or recommendations. Every individual’s situation is unique and should be reviewed by his or her own personal legal and tax consultants.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus, which contains detailed investment information, before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

A return of capital reduces an investor’s adjusted cost base. Capital gains taxes are deferred until units are sold or until the ACB goes below zero. Investors should not confuse this cash flow distribution with a fund’s rate of return or yield. While investors in Fidelity’s tax-efficient series (Tax-Smart CashFlow) will be able to defer some personal capital gains, they must still pay tax on capital gains distributions that arise from the sale of individual holdings by fund managers, and on interest and dividend distributions. Tax-Smart CashFlow will also pay a year-end distribution that must be reinvested in additional securities of the applicable fund. The monthly cash-flow distributions on Tax-Smart CashFlow are not guaranteed, will be adjusted from time to time and may include income.

The monthly cash-flow distributions on Fidelity Tax-Smart CashFlow™ are not guaranteed, will be adjusted from time to time and may include income. We will aim to keep cash flow between 7.5% and 9.0% of the NAV each year on Tax-Smart CashFlow F8, T8 and S8 balanced funds, as well as 4.5% and 5.5% of the NAV on F5, T5 and S5 balanced funds. For equity funds, we will aim to keep cash flow between 6.0% and 10.0% of the NAV each year on F8, T8 and S8, and between 4.0% and 6.0% of the NAV each year on F5, T5 and S5. The Fidelity Corporate Class funds are issued by Fidelity Capital Structure Corp. and are available through authorized dealers.

Read our privacy policy. By using or logging in to this website, you consent to the use of cookies as described in our privacy policy. This site is for persons in Canada only. Mutual funds and ETFs sponsored by Fidelity Investments Canada ULC are only qualified for sale in the provinces and territories of Canada.

Commissions, fees and expenses may be associated with investment funds. Read a fund’s prospectus or offering memorandum and speak to an advisor before investing.  Funds are not guaranteed, their values change frequently and investors may experience a gain or loss.  Past performance may not be repeated.

Read our privacy policy.  By using or logging in to this website, you consent to the use of cookies as described in our privacy policy.

This site is for persons in Canada only.  Mutual funds and ETFs sponsored by Fidelity Investments Canada ULC are only qualified for sale in the provinces and territories of Canada.

198674-v2021823

Close Search