The Complete Guide to the Section 217 Election Under the Canada Income Tax Act

For individuals who have left Canada or are considered non-residents for Canadian tax purposes, Canadian-source income is often subject to a flat withholding tax. In many cases, that withholding is higher than the tax that would otherwise apply if the income were taxed using Canada’s graduated tax system.

The Section 217 election under the Canada Income Tax Act allows eligible non-residents to file a Canadian tax return and potentially recover excess tax withheld. When used correctly, it can result in meaningful tax savings, particularly for retirees and individuals receiving Canadian pension income.

This guide explains how the Section 217 election works, who qualifies, how to make the election, key deadlines, and why someone may choose this option as part of a broader tax strategy.

What Is the Section 217 Election?

Normally, when a non-resident of Canada receives certain types of Canadian-source income, the payer is required to withhold non-resident tax, generally at a rate of 25 percent (or a reduced treaty rate). This withholding is typically considered final, meaning no Canadian tax return is required.

Section 217 of the Income Tax Act provides an exception. It allows eligible non-residents to elect to file a Canadian income tax return and have that income taxed using Canada’s regular graduated tax rates, rather than a flat withholding rate.

If the tax calculated under Canada’s progressive tax system is lower than the tax already withheld, the individual may receive a refund.

Who Can Make a Section 217 Election?

You may be eligible to make a Section 217 election if all the following apply:

• You were a non-resident of Canada or a part-year resident during the tax year.
• You received eligible Canadian-source income during that year.
• Non-resident tax was withheld from that income.

Common Types of Eligible Income

Eligible income under Section 217 generally includes:

• Canadian pension income
• Registered Retirement Income Fund (RRIF) payments
• Registered pension plan payments
• Certain annuity payments

Not all Canadian-source income qualifies. For example, rental income, employment income, and most investment income are generally excluded from Section 217 and may instead fall under different filing regimes. Canada Pension Plan and Old Age Security are only taxable in the U.S. for U.S. residents.

How the Section 217 Election Works

Step 1: Determine Whether the Election Is Beneficial

Before filing, it is important to compare:

• The amount of non-resident tax withheld, and
• The estimated tax payable if the income were taxed using Canada’s graduated tax rates.

If the graduated tax calculation results in a lower tax liability, the election may produce a refund. If the calculated tax is higher, filing under Section 217 may not be advantageous.

Step 2: Complete the Correct Canadian Tax Return

To make the election, you must file Form 5013-R Income Tax and Benefit Return for Non-Residents and Deemed Residents of Canada.

Clearly mark “Section 217” on the first page. You must report all eligible Canadian-source income and include any applicable information slips, such as NR4 slips, showing tax withheld.

Step 3: Complete the Required Schedules

A Section 217 return typically includes:

• Schedule C – Electing Under Section 217
  Used to report eligible income and calculate tax payable.
• Schedule A – Statement of World Income
  Used to report worldwide income to determine eligibility for certain credits.
• Schedule B – Allowable Federal Non-Refundable Tax Credits
  Used to calculate available credits, subject to eligibility rules.

Foreign income is reported for calculation purposes but is not taxed by Canada under Section 217.

Step 4: File the Return by Mail

Section 217 returns must be mailed to the appropriate Canada Revenue Agency tax centre based on your country of residence. Electronic filing is generally not available for these returns.

Supporting documentation should be included to avoid processing delays.

Important Filing Deadlines and Timeframes

Timing is critical with a Section 217 election.

• The return must be filed by June 30 of the year following the tax year.
• Late filings are not accepted. If the return is filed after June 30, the CRA cannot process the election, even if the result would have been a refund.

For example, if eligible income was received in 2025, the Section 217 return must be received by the CRA no later than June 30, 2026.

Why Someone Might Choose the Section 217 Election

Lower Overall Tax Liability

Because Section 217 allows income to be taxed using Canada’s graduated tax rates, many individuals with modest Canadian-source income pay less tax than the flat non-resident withholding rate.

Access to Certain Credits and Deductions

Depending on income levels and residency circumstances, some individuals may qualify for limited non-refundable tax credits, further reducing tax payable.

Refund of Excess Withholding

If too much tax was withheld at source, the Section 217 election is often the only way to recover that excess tax.

Improved Cash Flow Through Reduced Withholding

Individuals who regularly file Section 217 returns may apply to reduce future withholding at source using Form NR5, improving cash flow during the year.

Common Pitfalls and Planning Considerations

• Filing after the June 30 deadline results in automatic denial of the election.
• Including ineligible income can trigger reassessments or invalidate the filing.
• Incorrect residency classification can lead to CRA challenges.
• Section 217 elections interact with tax treaties and foreign tax credits, particularly for U.S. residents, and should be reviewed in a cross-border context.

Because of these complexities, the election should be evaluated as part of an integrated tax and retirement strategy.

FAQ

 

Can I use the Section 217 Election in Just One Year?

Yes — a Section 217 election can be made for just one year if that is all you want or need to do.

Here’s how it works:

1. Year-by-Year Filing
   A Section 217 election applies only to the specific tax year for which you file the return. You make the election when you file your Canadian non-resident tax return marked “Section 217” by the due date (generally June 30 of the year following the income year). The CRA will accept the election for that year alone, and you are taxed under Section 217 only for the eligible income included in that return. If you only want to elect for a single year, you can choose not to file Section 217 returns in other years. The election does not automatically carry forward.
2. Repeating the Election Each Year
   If you receive eligible Canadian-source income in future years and want to benefit from Section 217 again, you must file a Section 217 return for each of those years by the applicable June 30 deadline. The CRA treats each year’s filing as a separate election. There is no requirement to continue filing under Section 217 every year unless you want to claim refunds or maintain reduced withholding based on an NR5 approval.
3. When an NR5 Impacts Multiple Years
   If you apply for and receive an NR5 approval to reduce withholding going forward, the CRA’s decision may cover up to five years. However, even with an approved NR5, you must still file a Section 217 return for each year in that period to actually claim the reduced withholding and calculate your tax. Failing to file the annual return means you lose that benefit for that year.

The Section 217 election is a valuable but highly technical provision of the Canada Income Tax Act. For non-residents receiving Canadian pension or retirement income, it can significantly reduce Canadian tax and unlock refunds that would otherwise be lost.

However, the benefits depend on income levels, residency status, treaty considerations, and strict filing deadlines. Proper analysis and planning are essential before making the election.

For individuals with cross-border retirement income or ongoing ties to Canada, Section 217 should be reviewed alongside broader tax, estate, and cash-flow planning to ensure it is being used effectively and compliantly.

Section 217 Election – Frequently Asked Questions

What is the Section 217 election?

The Section 217 election is a provision of the Canada Income Tax Act that allows eligible non-residents to file a Canadian income tax return and have certain Canadian-source income taxed using Canada’s graduated tax rates instead of a flat non-resident withholding tax.

Who qualifies to file under Section 217?

You may qualify if you were a non-resident or part-year resident of Canada and received eligible Canadian-source income such as pension or retirement income that was subject to non-resident tax withholding.

What types of income qualify for a Section 217 election?

Common eligible income includes:

• Registered pension plan payments
• Registered Retirement Income Fund (RRIF) withdrawals
• Certain annuity payments

Not all Canadian-source income qualifies. Rental income, employment income, and most investment income are generally excluded. CPP and OAS are only taxable in your country of residence.

Is a Section 217 election mandatory?

No. The election is optional. If you do not make the election, the non-resident tax withheld at source is generally considered your final Canadian tax liability for that income.

Why would someone choose to make a Section 217 election?

Individuals often choose this election when the flat non-resident withholding tax exceeds what they would owe under Canada’s graduated tax system. Filing under Section 217 may result in a refund of excess tax withheld.

Can I claim tax credits under Section 217?

Some non-refundable federal tax credits may be available, depending on your income and circumstances. Eligibility is typically determined by the proportion of your worldwide income that is taxable in Canada.

Does Section 217 make me a Canadian tax resident again?

No. Filing under Section 217 does not change your residency status. You remain a non-resident for Canadian tax purposes. The election applies only to the eligible income reported on the return.

What is the deadline to file a Section 217 return?

The return must be filed by June 30 of the year following the tax year. Late filings are not accepted, even if the election would result in a refund.

What happens if I miss the June 30 deadline?

If the return is filed after June 30, the Canada Revenue Agency will not accept the Section 217 election. The non-resident tax withheld at source becomes final, and no refund is available.

How do I make the Section 217 election?

You must file the Income Tax and Benefit Return for Non-Residents and Deemed Residents of Canada and clearly mark “Section 217” on the first page. Required schedules and supporting slips must be included.

Can I file a Section 217 return electronically?

In most cases, Section 217 returns must be filed by mail. Electronic filing options are generally not available for non-resident Section 217 elections.

Do I have to report my worldwide income?

Yes. Worldwide income must be reported on Schedule A to determine eligibility for certain credits. Foreign income is reported for calculation purposes only and is not taxed by Canada under Section 217.

Can Section 217 reduce future withholding tax?

Yes. If you regularly file Section 217 returns, you may apply to reduce withholding on future payments by submitting Form NR5 to the CRA, subject to approval.

How does Section 217 interact with tax treaties?

Tax treaties may reduce the withholding tax rate applied at source, but they do not replace Section 217. In some cases, Section 217 can still result in a lower overall tax liability even when treaty rates apply.

Is Section 217 beneficial for U.S. residents?

It can be, but cross-border tax coordination is important. Canadian tax paid under Section 217 may be creditable against U.S. taxes, depending on income classification and timing. Improper planning can lead to mismatches or lost credits.

Can the CRA deny a Section 217 election?

Yes. The CRA may deny the election if:

• The return is filed late
• Ineligible income is included
• Required schedules or documentation are missing
• Residency status is incorrectly reported

Should I seek professional advice before filing?

Yes. Section 217 elections can significantly impact cash flow, refunds, and cross-border tax credits. Professional review is strongly recommended, particularly for retirees and individuals living outside Canada.