The 3:12 rules decide how much you can take as low-taxed dividend. Here's a clear walkthrough of the threshold, salary requirement and how to optimise.
The 3:12 rules govern how owners of closely held companies are taxed on dividends. Done right, you can take a significant amount at just 20% tax.
What is the threshold amount?
The threshold is the dividend taxed at 20%. It can be calculated two ways: the simplification rule (standard amount) or the main rule (based on payroll).
The simplification rule
A standard amount per company regardless of salaries. Simple for smaller companies without staff.
The main rule
Based on salaries paid. Requires you to take a certain salary yourself — but often gives a much higher threshold.
The salary requirement
- You must take a market-level salary.
- The requirement is based on the company's total payroll.
- Miss it and the main rule falls away.
Rule of thumb: calculate both rules every year — the one giving the highest threshold wins.
Want help optimising your withdrawal? Book a meeting and we'll run the numbers for your situation.