February 13, 2019

New refundable dividend tax on hand (RDTOH) rules for CCPCs

For taxation years beginning after December 31, 2018, all Canadian controlled private corporations (CCPCs) earning investment income must consider a new set of complex rules relating to their refundable dividend tax on hand (RDTOH) balances. These rules could increase the tax costs to individuals when distributing corporate funds from their private corporations. Taxpayers will need to review their companies’ RDTOH balances to determine whether planning is required. The 2018 federal budget announced new measures that restrict the ability to recover RDTOH through the payment of eligible dividentds, with limited exceptions. As a result, the cost of extracting profits from a CCPC may go up for owner-manager. Consider speaking to your accountant about these rule changes will affect you, and how you can plan for these taxation changes.

The new RDTOH rules will impact taxation years starting in 2019. To prepare for the change, you should discuss it with your accountant and start planning now.

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