Refundable dividend tax on hand (RDTOH)
Refundable dividend tax on hand (RDTOH) is the running total of the refundable portion of a private corporation’s Part I tax and its Part IV tax, less any dividend refund received. When it pays taxable dividends, the corporation may receive a dividend refund under section 129 of the Income Tax Act.
You meet RDTOH when a private corporation holds investments or receives dividends from other companies, and a buyer or seller asks what tax is sitting in the corporation. The Canada Revenue Agency says the account applies only to corporations that are private or subject corporations.
How it is built
The CRA says a Canadian-controlled private corporation generates RDTOH on both the Part I tax it pays on investment income and the Part IV tax it pays on dividends it receives. For any other type of private corporation, only Part IV tax generates it. The Act keeps two balances, eligible and non-eligible. Subsection 129(1) provides for the dividend refund, on taxable dividends paid while the corporation was a private corporation, where its return for the year is made within 3 years after the end of the year, and sets how the refund is worked out from them. See tax on a sale for where it fits.
What to ask
- What each of the two balances is at the last year-end
- Whether a dividend refund was claimed, and in which years
- Whether the CRA’s business account shows the same balances
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Canada Revenue AgencyGovernmentAbout Refundable Dividend Tax on Hand (RDTOH) Balances
- 02Government of CanadaGovernmentIncome Tax Act, R.S.C. 1985, c. 1 (5th Supp.)
- 03Canada Revenue AgencyGovernmentT2 Corporation – Income Tax Guide – Chapter 6: Pages 6 and 7 of the T2 return
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