Lines 460, 465, 480, and 485
Refundable dividend tax on hand
Note
For tax years starting before 2019, do this calculation on page 6
of the return. For tax years starting after 2018, do the
calculation on page 7. For tax years starting after 2018, a private
corporation's dividend refund will be calculated by reference to
two new accounts, the eligible refundable dividend tax on hand
(ERDTOH) and the non-eligible refundable dividend tax on hand
(NERDTOH). They will replace the existing RDTOH account for those
years.
For more information on eligible dividends, go to canada.ca/taxes-eligible-dividends or see page 83.
The RDTOH account only applies to corporations that were private or subject corporations, which are defined on page 84.
A CCPC generates RDTOH on both the Part I tax it pays on investment income and on the Part IV tax it pays on dividends it receives. For any other type of private corporation, only the Part IV tax it pays generates RDTOH.
For more information on taxable dividends deductible under section 112 or 113, or subsection 138(6), see page 61.
For information on Part IV tax and instructions to complete Schedule 3, see page 84.
All or part of the RDTOH at the end of the tax year is available as a refund if the corporation pays taxable dividends to the shareholders during the tax year.
You can view refundable dividend tax on hand balances using the "View return balances" service through:
-
My Business Account at canada.ca/my-cra-business-account, if you are the business owner
-
Represent a Client at canada.ca/taxes-representatives, if you are an authorized representative or employee
To calculate the RDTOH at the end of the tax year, add the following amounts:
-
the RDTOH balance at the end of the previous tax year (minus any dividend refund issued to the corporation in the previous year)
-
the refundable portion of Part I tax from line 450
-
Part IV tax calculated on line 360 of Schedule 3
-
any balance of RDTOH transferred from a predecessor corporation on amalgamation, or from a wound-up subsidiary corporation
On line 460, enter the RDTOH the parent corporation is carrying forward from its previous tax year.
Enter on line 465, any dividend refund issued to the corporation in the previous year.
For the first tax year of a new corporation formed as a result of an amalgamation, enter on line 480 all RDTOH balances being transferred from predecessor corporations. Do not include this amount on line 460.
For a parent corporation that wound up a wholly owned subsidiary, enter on line 480 any RDTOH transferred from the subsidiary corporation. For tax years starting after 2018 that have established ERDTOH and NERDTOH balances, enter the amounts transferred as a result of an amalgamation or the wind-up of a subsidiary on line 525 for the ERDTOH and on line 540 for the NERDTOH.
Note
You cannot transfer any RDTOH to a new or parent corporation if,
had the predecessor or subsidiary corporation paid a dividend
immediately before the amalgamation or wind-up, subsection 129(1.2)
would have applied to that dividend.
For tax years starting before 2019, enter the RDTOH at the end of the tax year on line 485. Also, enter the same amount at amount T in the "Dividend refund" area on page 6 of your return. For tax years starting after 2018, enter the NERDTOH at the end of the tax year on line 545 and at amount EE in the new "Dividend refund" area on page 7 of your return. Enter the ERDTOH at the end of the tax year on line 530 and at amount BB in the same area.
References
Subsections 129(3) and 186(5)
Dividend refund
Note
For tax years starting before 2019, do this calculation on page 6
of the return. For tax years starting after 2018, do the
calculation on page 7. For tax years starting after 2018, a private
corporation's eligible dividends will generate dividend refunds
from the ERDTOH, and non-eligible dividends will generate dividend
refunds from the NERDTOH first, then possibly from the ERDTOH. The
calculation will effectively require a private corporation to get a
refund from its NERDTOH account before it gets a refund from its
ERDTOH account, when it pays a non-eligible dividend. A
transitional rule will preserve the refundability of a
corporation's pre-existing RDTOH.
A private or subject corporation may be entitled to a dividend refund for dividends it paid while it was a private or subject corporation, regardless of whether it was a private or subject corporation at the end of the tax year.
Note
To claim a dividend refund or to apply the amount to another debit
for any tax year, including the same tax year, you have to file
your income tax return within three years of the end of the tax
year. If your income tax return is not filed within three years of
the end of the tax year, the dividend refund becomes statute
barred, and will not be issued.
A dividend refund arises if you pay taxable dividends to shareholders, and if there is an amount of RDTOH or, for tax years starting after 2018, an amount of NERDTOH or ERDTOH at the end of the tax year. To claim a dividend refund, you have to have made an actual payment to the shareholders, unless the dividend is considered paid (a deemed dividend).
You can make this payment either in cash or with some other tangible assets at fair market value, including the following:
-
stock dividends
-
section 84 deemed dividends
-
amounts paid as interest or dividends on income bonds or debentures that are not deductible when calculating income
If you lose your private status following a change in control, a deemed year-end occurs. This allows you to claim a dividend refund for any dividends paid during the deemed short year.
You have to complete Parts 3 and 4 (if they apply) of Schedule 3 to claim a dividend refund.
For tax years starting before 2019, the dividend refund is equal to whichever of the following amounts is less:
-
38 1/3% of taxable dividends that you paid in the year as a private or subject corporation
-
the RDTOH at the end of the tax year
For tax years starting after 2018, the dividend refund is equal to the total of the following amounts:
-
for eligible dividends, the amount (referred to below as amount 1) that is the lesser of 38 1/3% of the total of all eligible dividends you paid in the year and your ERDTOH account balance at the end of the year;
-
for non-eligible dividends, the total of the two following amounts:
-
the amount that is the lesser of 38 1/3% of the total of all non-eligible dividends you paid in the year and your NERDTOH account balance at the end of the year
-
the amount that is the lesser of:
-
the amount, if any, by which 38 1/3% of the total of all non-eligible dividends you paid in the year is more than your NERDTOH account balance at the end of the year
-
the amount, if any, by which your ERDTOH account balance at the end of the year is more than amount 1
-
-
The total of taxable dividends paid for the purpose of the dividend refund is equal to the amount on line 460 of Schedule 3. Refundable dividend tax on hand refers to the amount on line 485 in the "Refundable dividend tax on hand" area of your return. Eligible refundable dividend tax on hand refers to line 530 and non-eligible refundable dividend tax on hand refers to line 545.
Parts 3 and 4 of Schedule 3
The following explains how to complete Parts 3 and 4 of Schedule 3. Parts 1 and 2 are explained on page 85.
If you paid taxable dividends during the year, complete Part 3 to identify taxable dividends that qualify for the dividend refund.
If the amount of dividends paid includes dividends that do not qualify for the dividend refund, you have to deduct these dividends before completing the calculation in Part 3. In this case, complete Part 4 of Schedule 3 to identify dividends that do not qualify.
Dividends that do not qualify are:
-
dividends paid out of the capital dividend account
-
capital gains dividends
-
dividends paid for shares that do not qualify as taxable dividends, because the main purpose of acquiring the shares was to receive a dividend refund [subsection 129(1.2)]
-
taxable dividends paid to a controlling corporation that was bankrupt at any time in the year
Complete Part 3 of Schedule 3 to identify a connected corporation that received taxable dividends that qualify for the dividend refund.
If the dividend refund is more than the amount of Part I tax payable for the year, we deduct the excess from any other taxes owed under the Income Tax Act. Any balance left over is available for a refund.
If the total dividends paid during the year is different from the total of taxable dividends paid for the purpose of the dividend refund, complete Part 4 of Schedule 3.
References
Section 129
Subsection 186(5)
Paragraph 129(1)(a)
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