Russell Investments Corporate Class

Our corporate class solutions offer tax-efficient investing opportunities.

Why Use Corporate Class Corporate Class Funds & Portfolios Capital Dividend Account

Corporate class funds are designed to eliminate or minimize taxable distributions.

Because they do not typically distribute interest income to shareholders, corporate class funds can provide more tax-efficient returns than comparable portfolios of mutual funds or individual securities. Annual distributions are generally eligible Canadian dividends and capital gains, which are taxed at a more favorable rate than interest income. Monthly distributions can also be provided as return of capital, which is not taxable until the original investment is depleted.

Why use corporate class?

Light bulb with leaf inside icon

Benefit from tax-deferred growth of your investments

Three globes with dollar pound euro symbols icon

Receive income as a return of capital, which is not immediately taxable

Calendar icon

Choose when to realize capital gains, which could help you manage your taxable income

Russell Investments - Corporate Class Funds

Russell Investments Short Term Income Class (closed to new purchases)
Russell Investments Fixed Income Class (closed to new purchases)
Russell Investments Fixed Income Plus Class (closed to new purchases)
Russell Investments Canadian Dividend Class 
Russell Investments Canadian Equity Class
Russell Investments Global Smaller Companies Class
Russell Investments Tax-Managed US Equity Class
Russell Investments US Equity Class
Russell Investments Overseas Equity Class
Russell Investments Tax-Managed Global Equity Class
Russell Investments Emerging Markets Equity Class
Russell Investments Global Equity Class

Russell Investments Global Infrastructure Class

 

Russell Investments - Corporate Class Portfolios

Income
Russell Investments Conservative Income Class
Russell Investments Income Essentials Class
Russell Investments Diversified Monthly Income Class

Accumulation
Russell Investments Balanced Class
Russell Investments Balanced Growth Class
Russell Investments Long-Term Growth Class

Multi-Asset Corporate Class Solutions

Multi-Asset Income Strategy Class
Multi-Asset Growth Strategy Class
Multi-Asset Growth & Income Strategy Class

All this, plus Russell Investments' renowned investment process and diversification across asset classes, investment styles, and money managers.

 

All taxable Canadian dividends (other than capital gains dividends) paid by Russell Investments Corporate Class are eligible dividends for federal tax purposes unless otherwise indicated.

See U.S. Dollar Hedged Series

Funds for tax-sensitive investors who want exposure to the U.S. Dollar

Capital Dividend Account

A tax-planning tool for small business owners

A Capital Dividend Account (“CDA”) combined with corporate class funds can be an effective way for shareholders of a Canadian business to generate tax-efficient income.

Priority arrows icon

What is a CDA?

A CDA is a notional account that keeps track of various tax-free surpluses accumulated by a small business designated as a Canadian controlled private corporation, or CCPC. Those surpluses can be paid out as tax-free capital dividends to shareholders.

A corporation’s CDA balance can include:

  • Capital gains and losses
  • Dividends received from another company
  • Proceeds from a life insurance policy in excess of the Adjusted Cost Base of the policy
  • Gains and losses on the sale of some fixed assets1

Related content

Investor education

From a tax perspective, it may be beneficial for a corporation to realize capital gains rather than interest income, to determine when those capital gains are recognized, and to have the gains flow through a CDA. Capital gains are a tax-efficient type of investment income for corporations (and individuals) as they are taxable at only 50%. Interest income does not qualify as an eligible addition to a CDA.

Tax rules that govern private corporations also make it more attractive to realize capital gains rather than interest income. Private corporations subject to the small business tax rate face a higher tax bill if their annual passive investment income exceeds $50,000. Any amount of passive income earned above that rate reduces access to the small business preferential tax rate, and the preferential rate is eliminated completely when passive investment income exceeds $150,000. Passive investment income is comprised of interest income and eligible dividends plus 50% of capital gains. Therefore, emphasizing capital gains over interest income can help reduce passive investment income (also known as Aggregate Investment Income). 

Corporate class funds may provide private corporations with the potential to take advantage of the benefits of a CDA. Corporate class solutions are structured so that investors can realize income in the form of capital gains. When a company receives a capital gain, the non-taxable portion of the gain is added to the CDA, increasing its balance. This allows the CCPC to declare a tax-free capital dividend for its Canadian resident shareholders. As an extra benefit for the shareholder, this tax-free distribution doesn’t impact government benefits such as Old Age Security.

Corporate class funds can offer the following benefits to a shareholder of a CCPC:

  • Minimize passive investment income and defer taxes payable
  • Generate taxable distributions in the form of capital gains and Canadian eligible dividends
  • Option to generate income in the form of Return of Capital
  • Grow the CDA balance

Important considerations

Capital dividends paid to non-residents are subject to withholding taxes. Additionally, before a capital dividend is paid, the corporation must file an election with the Canada Revenue Agency.

The following is a hypothetical example of the financial benefit Russell Investments Income Essentials Class (RIIEC) can provide to shareholders of a CCPC. We will assume the CCPC invests $1 million in each of two options:
1) Russell Investments Income Essentials Class and
2) a balanced portfolio of securities2 with the same equity / fixed income allocation as RIIEC.

In each case, the total portfolio rate of return is assumed to be 4%. The chart depicts a detailed tax calculation for a CCPC investment account at a corporate account level and at an individual shareholder account level.

Click image to enlarge The Capital Dividend Account

For illustrative purposes only and not a recommendation to purchase or sell any security.

Highest marginal tax rates => The following 2021 Ontario marginal tax rates are used for calculating the tax liabilities: interest income = 53.5%, Canadian eligible dividends = 39.3% and capital gains = 26.8%. Ontario 2021 corporate investment income tax rate is 50.17%.

Russell Investments does not provide legal or tax advice. Laws of a particular province or laws which may be applicable to a particular situation may have an impact on the applicability of such information. Federal and provincial laws and regulations are complex and are subject to change. Changes in such laws and regulations may have a material impact on pre- and/or after-tax investment results. Always consult a lawyer or tax professional regarding your specific legal or tax situation.

Key Assumptions

  • The above income is the only source of income for the CCPC and the General Rate Income Pool (GRIP)3 balance is $nil.
  • The above calculation assumes one year holding period.
  • Dividends paid by CCPC are other than eligible dividends as income received are not included in the GRIP balance because the income is excluded from the “adjusted taxable income” definition in subsection 89 (1) of the Income Tax Act (Canada).
  • Refundable dividend tax on hand (RDTOH) refund is calculated as the lesser of the RDTOH account balance and one third of the taxable shareholder dividend. Interest and Capital Gains will have RDTOH carry forward as there is not enough cash to pay a dividend and receive the full refund.
  • The CCPC has a taxation year-end of December 31, 2021.
  • The CCPC is registered in Ontario and is taxed at the appropriate Ontario corporate tax rate.
  • The shareholders of the CCPC are taxed at the highest marginal tax rate. Assume no corporate law restrictions on paying a dividend.
  • RIIEC is a type of Mutual Fund Corporation (MFC).
  • For RIIEC the Paid-Up Capital (PUC) and Adjusted Cost Base (ACB) of the fund and CCPC is initially $1,000,000.
  • Assumed fixed income yield is 3%. Assumed dividend yield is 3% for foreign equities.

1 Income Tax Folio S3-F2-C1, Capital Dividends, Canada Revenue Agency website.

2 Representative portfolio consists of 35% equity/65% fixed income.

3 The General Rate Income Pool (GRIP) is a pool that keeps track of income that gets taxed at the general corporate tax rates for all Canadian Controlled Private Corporations (CCPC's). When the corporation pays dividends, it is allowed to designate the amount in the GRIP Balance as Eligible Dividends.