Budget 2018: Business Income Tax Measures, Part 2

by in Canadian Government News and Updates
Budget 2018: Business Income Tax Measures, Part 2
On this blog, we will focus on Budget 2018’s proposal with regards to the Refundable Dividend Tax on Hand or RDTOH.

Refundable Dividend Tax on Hand or RDTOH: Budget 2018 proposes that a refund of RDTOH be available only in cases where a private corporation pays non-eligible dividends. An exception will be provided in respect of RDTOH that arises from eligible portfolio dividends received by a corporation, in which case the corporation will still be able to obtain a refund of that RDTOH upon payment of eligible dividends.

With regards to RDTOH Recapture – Connected Corporations: Currently, if a corporation obtains a refund of RDTOH upon the payment of a dividend to a connected corporation, the recipient corporation pays refundable tax under Part IV of the Income Tax Act equal to the amount of tax refunded to the payor. This amount is then added to the recipient corporation’s RDTOH account. Under the proposed measure, the corporation receiving such a dividend will continue to pay an amount of Part IV tax equal to the refund obtained by the payor corporation. This amount, however, will be added to the RDTOH account of the recipient corporation that matches the RDTOH account from which the payor corporation obtained its refund.

Upon payment of a non-eligible dividend, a private corporation will be required to obtain a refund from its non-eligible RDTOH account before it obtains a refund from its eligible RDTOH account.

This measure will apply to taxation years that begin after 2018.

Remember, you can contact us at KD if you are going to be affected by this tax measure. We will be happy to help you out and discuss this matter with you further.

Next week, we will look at the Personal Income Tax Measures included in Budget 2018.

Source: https://www.budget.gc.ca/2018/docs/tm-mf/tax-measures-mesures-fiscales-2018-en.pdf
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