What tax applies to funds on gains at the fund level?

At the fund level, certain types of investment funds, such as mutual funds or regulated investment companies, are not subject to taxation on their earnings or gains, provided they meet specific regulatory requirements. This is known as "pass-through" taxation, where the income and capital gains generated by the fund are passed on to the investors, who then report this income on their individual tax returns. As a result, the fund itself does not incur a tax liability, allowing for greater efficiency and potentially more favorable tax treatment for the investors.

The nature of how these funds operate is designed to encourage investment while avoiding double taxation—first at the fund level and again at the individual level. This structure is particularly beneficial in facilitating capital growth and providing investors access to a diversified portfolio without the drag of taxation at the fund level.