In this article, we answer frequently asked questions about the tax slips issued when you receive mutual fund distributions in non-registered accounts. The guidance below does not apply to your holdings in a registered account. Read about taxes on investments in your RRSP or TFSA here.
Every year that a mutual fund pays out distributions in your non-registered account, you will receive a T3/Relevé 16 tax slip (see image below). This form is also known as a Statement of Trust Income Allocations and Designations. It states:
- the total amount of income the fund distributed in the previous year
- the amount of each type of taxable income you received (dividend, capital gain, etc). To learn more, read Understanding mutual fund distributions.
You must declare all of this income on your tax return. The only exception is return of capital.
No. Distributions are not necessarily related to fund performance. In fact, a fund may pay distributions to you even though it has a negative rate of return for the year.
No. Your T3 tax slip (or Relevé 16) shows only capital gains that the fund distributes to you. If you sell units during the year, you will receive a T5008 statement. This details your transactions and can be used to verify any capital gains or losses.
Yes. All distributions for non-registered investments are taxable, whether you receive them in cash or as additional units. All income types are taxable for the year received, except for return of capital (ROC). ROC is typically tax-deferred until your investment is sold.
This guide explains taxes on mutual fund distributions in more detail. It includes a section on understanding your year-end tax slips. Ask a qualified tax advisor to help you make informed investment decisions and understand the impact of tax on your mutual funds.