Tax centre

In broad terms, a ‘reporting fund’ for UK tax purposes is an offshore fund that meets certain upfront and annual reporting requirements to Her Majesty’s Revenue and Customs (HMRC) and its investors. Such annual duties will include calculating and reporting the income returns of the reporting share class for each reporting period on a per-share basis to all relevant investors. UK investors who hold their interests at the end of the reporting period, to which the reported income relates, will be subject to income tax or corporation tax on the higher of any cash distribution paid and the full reported amount. The reported income will be deemed to arise to UK investors six months after the reporting period.

As a general rule, each Capital Group Luxembourg fund and their respective sub-funds intend to obtain reporting fund status for the following share classes for every period of account ("reporting period") that they are available and active:

C, L, P, S, Z, ZL and their equivalent distributing share classes (d and gd) in GBP, EUR, USD and CHF. The equivalent hedged share classes of the above listed share classes in GBP, EUR, USD and CHF (for C only those that are hedged back into GBP). For Capital Group Japan Equity Fund (LUX) it will also be sought in JPY. Other specific classes may be added as required by UK investors.

B, BL and their equivalent distributing share classes (d and gd) in GBP, EUR, USD and CHF (in addition to JPY for Capital Group Japan Equity Fund (LUX)), as well as the equivalent hedged share classes in GBP, EUR, USD and CHF (in addition to JPY for Capital Group Japan Equity Fund (LUX)), will continue to benefit from UK reporting fund status for investments made prior to 30 September 2024.

The investor tax report will be made available on the website here in the Tax centre, within the six months following the end of the reporting period. However, if you require this information in writing, please contact Capital Group's IST Client Operations Team on +41 22 807 4800, or, if you are an institutional client, your Relationship Manager. Alternatively, you can email us.

The investor tax reports are published for each reporting share class for each reporting period. They comprise the "distributions" per share made by the fund during the period, as well as the "excess reportable income" per share at the end of the reporting period. The excess reportable income is broadly based on the net income of the fund in excess of distributions made during the reporting period. UK investors must include both the actual distributions received, as well as the excess of reportable income in their tax returns on which they will be liable to pay income or corporation tax as appropriate.

On disposal of an interest in a reporting fund share class, a UK individual investor will be subject to capital gains tax on any gain/loss providing that the share class in question had been a reporting share class for the entire period of investment. However, any gain on disposal by a UK individual investor of an interest in a non-reporting share class will be treated as income for UK tax purposes and therefore subject to income tax. For UK corporate investors, disposals of interests in reporting funds will be treated as chargeable gains and disposals in non-reporting funds will be treated as taxable income.

In order to determine the actual distribution received, the UK investors should multiply the number of shares that they held as at each distribution date by the corresponding distribution amount per share provided in the investor tax report. Alternatively, investors can refer to the dividend vouchers they received in the course of the reporting period.

In order to calculate their excess reportable income, the UK investors should multiply the number of shares they held as at the end of the reporting period by the excess of reportable income per share as provided in the investor tax report.

The distributions per share and excess of reportable income per share amounts are provided in the base currency of the fund, as specified at the top of the investor tax report. UK investors should apply an appropriate exchange rate to convert these figures to GBP.

The "reportable income" should be recognized in the tax return as a distribution that arose on the reporting period end date plus six months. The reportable income is treated as an additional taxable distribution received by the investors.

We have set out below an example for an investor who received two distributions and excess reportable income:

Example

Calculation of total reportable income

Each Capital Group Luxembourg fund operates full equalization. This enables the investors to be taxed on the appropriate level of income that they have earned during the period. To make adjustments for the income equalization purchased, investors will require the daily income equalization rate (IER).

The IER is available at share class level. It corresponds to the net income per share earned from the beginning of the reporting period to the date the shares are purchased. It is provided in the IER report, available on the website here in the Tax centre, and expressed in the base currency of the fund.

The IER is relevant to the shareholders who have subscribed for shares in the course of the reporting period. For those new investors or existing investors making additional investments into the fund, the total income equalization (equal to the IER as at the date of the subscription multiplied by the number of shares subscribed) can be deducted from the total reportable income and any distributions. Investors can choose whether to offset the IER against their excess reportable income or distributions (in any order) until the IER is fully utilized.

In our example above, let's assume that out of 100 shares, 40 were subscribed at the end of the 4th month of the accounting period and the investor has decided to deduct the IER against their excess reportable income first. The IER as at the date of subscription was 0.8 USD / share.

Note that if the total income equalization amount is greater than the excess reportable income, the excess reportable income will be reduced to zero. The balance of equalization not netted against the excess reportable income can further be offset against any dividend income.

In a variation of the example above, let's assume that out of 100 shares, 80 were subscribed at the end of the 4th month of the accounting period. The IER as at the date of subscription was 0.8 USD / share.

Under UK tax rules, funds which hold more than 60% of their assets (by market value) in interest bearing securities at any time during an accounting period will be considered as "bond" funds, and the reportable income from these funds (cash distributions and excess of reportable income) will be treated as payment of interest in the hands of UK taxable investors rather than dividends. Accordingly, for UK resident individual investors such distributions will be subject to tax at the rates applying to interest. Whilst for UK resident corporate investors, such distributions would be deemed to be “loan relationship” for UK corporation tax purposes.

For the current reporting period, the list of Capital Group funds that are classified as a 'bond' fund is as follows:

• Capital Group Emerging Markets Debt Fund (LUX) 
• Capital Group Emerging Markets Local Currency Debt Fund (LUX)
• Capital Group Euro Bond Fund (LUX)
• Capital Group Global Bond Fund (LUX)
• Capital Group Global Corporate Bond Fund (LUX)
• Capital Group Global High Income Opportunities (LUX) 
• Capital Group Global Intermediate Bond Fund (LUX) 
• Capital Group Global Total Return Bond Fund (LUX) 
• Capital Group US Corporate Bond Fund (LUX) 
• Capital Group US High Yield Fund ( LUX)
• Capital Group Multi-Sector Income Fund (LUX)
• Capital Group Sustainable Global Corporate Bond Fund (LUX)