Refundable Dividend Tax On Hand Account (RDTOH)

The Refundable Dividend Tax On Hand (RDTOH) account is a mechanism in the tax system that refunds a portion of tax when taxable dividends are distributed to shareholders. Passive investment income is subject to a higher tax rate than active business income in a business; to alleviate this, a refund is available on part of that tax when the corporation pays taxable dividends to shareholders (refundable portion of Part I tax). This only applies to Canadian Controlled Private Corporations.

RDTOH is generated when a corporation pays tax on investment income and when it pays tax on dividends received in Part IV. A refund is available for all or part of the RDTOH at the end of the tax year if taxable dividends are paid. Corporations can view there balance by logging into “My Business Account” on the CRA website.

RDTOH has been further segregated by non-eligible and eligible dividend amounts; these amounts will only be available when eligible or non-eligible dividends are paid out respectively.

Disclaimer: This commentary is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice, nor does it constitute solicitation to buy or sell any securities referred to. Any tax information published on this blog is based on the facts provided to us and on current tax law (including judicial and administrative interpretation) during the time of publication. Tax law can change (at times on a retroactive basis) and these changes may result in additional taxes, interest, or penalties. Practice due diligence and if in doubt, speak with a member of our team.

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