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RDTOH stands for refundable dividend tax on hand. It’s a running balance a private corporation keeps with the CRA, made of tax it paid that it can get back once it pays taxable dividends to its shareholders. The refund is capped at 38 1/3% of the dividends paid in the year, or the balance, whichever is smaller.
Think of it as a deposit the corporation leaves with the taxman. It sits there until a dividend goes out, and only then does the refund become claimable.
Where does the balance come from?
Only private corporations, and certain others called subject corporations, carry an RDTOH account. Money goes in from two places. One is the refundable part of the regular corporate tax (Part I). The other is Part IV tax, which a corporation pays when it receives dividends from other corporations.
The CRA splits the account in two. Eligible RDTOH collects Part IV tax on eligible dividends from unconnected companies. Non-eligible RDTOH collects the refundable Part I tax on investment income of a Canadian-controlled private corporation, which the CRA puts at 30 2/3% of its aggregate investment income. It also collects any Part IV tax that didn’t go to the eligible side.
| Item | Rule |
|---|---|
| Refund rate on dividends paid | 38 1/3% |
| Refundable part of tax on investment income (CCPC) | 30 2/3% of aggregate investment income |
| Eligible dividends refund from | Eligible RDTOH |
| Non-eligible dividends refund from | Non-eligible RDTOH first, then eligible if that runs out |
How does an RDTOH refund work in numbers?
Say a Canadian-controlled private corporation earns $10,000 of investment income. Using the CRA’s 30 2/3% figure, $3,066.67 goes into the non-eligible RDTOH balance. That’s our arithmetic, not a CRA example, and it ignores the rest of the corporate tax on that income.
Later the corporation pays its owner an $8,000 non-eligible dividend. Multiply by 38 1/3% and you get $3,066.67, exactly the balance. The whole amount comes back. Pay only $5,000 and the refund is $1,916.67, so $1,150 stays in the account for another year.
So the account doesn’t vanish if you don’t pay a dividend. It waits. But the money is tied up until you pay one, which matters if the owner would rather leave cash inside.
How big a dividend does it take to get the whole refund?
Divide the balance by 38 1/3% and you have the answer. A balance of $3,066.67 needs $8,000 of dividends, which is the example above. As a rule of thumb, it takes about $2.61 of dividends to release each $1 of refund.
Pay more than that and the extra dividend still counts as a dividend for the owner’s personal tax, but it brings no extra refund. Say the corporation pays $20,000 instead. The refund is still $3,066.67, because the balance is the cap, not the dividend.
Why should an owner care?
Because part of the tax a corporation pays on investment income is refundable, and the refund only shows up if a dividend goes out. That ties your payout plans to the account. The owner still pays personal tax on the dividend, and the dividend tax calculator shows that side.
To see the corporate side, use the corporate tax calculator. It handles ordinary business income only. It doesn’t model investment income, the small business limit reduction or refundable accounts, so it can’t give you an RDTOH figure. For the personal tax on a payout, the marginal tax rate calculator is a useful second check.
Mistakes and limits
The big one is thinking every dividend triggers a refund. Refunds are only for taxable dividends, and only up to the balance. Another is mixing up the two accounts, since the order of use matters when you pay both kinds in one year.
Passive income has a second cost. The CRA’s T2 guide reduces the small business limit for adjusted aggregate investment income between $50,000 and $150,000, so a large portfolio can push active business income into the higher rate. We haven’t modelled that here.
Where do you find your balance? On the T2 return schedules, and the CRA says balances can be viewed through its business services. Since the schedules get filled in from prior years, check them against your accountant’s file rather than guessing.
Where we got these figures
The 38 1/3% rate and account rules come from the CRA’s dividend refund rules page, and the general RDTOH description from the CRA’s business account page. The 30 2/3% figure appears on the same dividend refund page. All amounts and the worked example use these rules as of the 2026 tax year, and this site isn’t connected to the CRA.
Frequently asked questions
What does RDTOH stand for?
Refundable dividend tax on hand. It is a balance of corporate tax a private corporation can recover by paying taxable dividends.
How much is refunded when a dividend is paid?
The lesser of 38 1/3% of taxable dividends paid in the year and the RDTOH balance at year end.
What are eligible and non-eligible RDTOH?
Two separate accounts. Eligible RDTOH is refunded by eligible dividends. Non-eligible RDTOH is refunded by non-eligible dividends, and it is used first when both are paid.
Does every corporation have an RDTOH account?
No. The CRA says it applies to private corporations and subject corporations.
Where can I see my balance?
On the T2 return schedules, and the CRA describes viewing RDTOH balances through its business account services.
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