Lines 460, 465, 480, 530, and 545
The RDTOH account only applies to corporations that were private or subject corporations, which are defined on page 85.
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 62.
For information on Part IV tax and instructions to complete Schedule 3, see page 85.
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:
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My Business Account at canada.ca/my-cra-business -account, if you are the business owner
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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:
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the RDTOH balance at the end of the previous tax year (minus any dividend refund issued to the corporation in the previous year)
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the refundable portion of Part I tax from line 450
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Part IV tax calculated on line 360 of Schedule 3
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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 after 2018, enter the NERDTOH at the end of the tax year on line 545 and at amount EE in the "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 after 2018, a private corporation's
eligible dividends generate dividend refunds from
the ERDTOH. Non-eligible dividends generate dividend
refunds from the NERDTOH first, and then possibly
from the ERDTOH. The calculation effectively requires 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 was set to 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:
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stock dividends
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section 84 deemed dividends
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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 after 2018, the dividend refund is equal to the total of the following amounts:
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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
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for non-eligible dividends, the total of the two following amounts:
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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
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the amount that is the lesser of:
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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
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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 in the tax year that qualify for a dividend refund is equal to the amount on line 460 of Schedule 3. Eligible refundable dividend tax on hand refers to line 530 of the return 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:
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dividends paid out of the capital dividend account
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capital gains dividends
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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)]
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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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