Time To Act Before Year End: Corporate RDTOH Planning Opportunities

Currently, through the operation of the refundable dividend tax on hand (RDTOH) rules, a portion of the tax paid on passive income earned by a private corporation is refunded when the corporation pays dividends. The refund is available regardless of whether the dividends paid are eligible dividends (generally from active business income taxed at the general income tax rate) or non-eligible dividends (generally from passive investment income and active business income taxed at the small business tax rate).

As of January 1, 2019, changes to the RDTOH rules will limit the dividend refund to (1) non-eligible dividends paid by the corporation and (2) Part IV tax on eligible portfolio dividends received by the corporation.