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Tax: Refundable Dividend Tax On Hand Account

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.