Electing under Section 217 of the Income Tax Act

T4145(E) Rev. 21

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La version française de cette brochure est intitulée Choix prévu à l’article 217 de la Loi de l’impôt sur le revenu.

Unless otherwise stated, all legislative references are to the Income Tax Act or, where appropriate, the Income Tax Regulations.

Is this pamphlet for you?

This pamphlet is for you if both of the following apply:

This pamphlet explains what a section 217 election is and how to decide if it is beneficial for you. It also explains how to complete a 2021 section 217 return.

Table of contents

Electing under section 217 of the Income Tax Act

What is a section 217 election?

If you are a non-resident of Canada, Canadian payers have to withhold non-resident tax on certain types of Canadian-source income they pay or credit to you. The tax withheld is usually your final tax obligation to Canada on this income and you do not have to file a Canadian Income Tax and Benefit Return to report it. However, you can choose to file a Canadian return to report certain types of Canadian-source income listed in the next section by “electing under section 217 of the Income Tax Act.” In doing so, you may pay tax on this income using a different method and may receive a refund of all or part of the non-resident tax withheld.

If you emigrated from Canada in 2021, the section 217 election applies to Canadian-source income (listed below) that is received after leaving Canada.

If you immigrated to Canada in 2021, contact the Canada Revenue Agency (CRA) for any special section 217 rules that may apply to you.

Eligible section 217 income

The section 217 election applies to the following types of Canadian-source income:

Note

If you received old age security benefits, you may need to file Form T1136, Old Age Security Return of Income, even if you choose not to file a return under section 217. For more information, see Guide T4155, Old Age Security Return of Income Guide for Non-Residents.

Why elect under section 217?

You will benefit from electing to file a return under section 217 if the total tax payable on line 43500 on your return is less than the tax you would otherwise pay if you did not make this election. When processing your return, the CRA will only take your election under section 217 into account if it is beneficial.

To determine the tax you would otherwise pay if you did not make a section 217 election, add the following amounts:

To calculate the total tax payable on your section 217 return, see Completing your section 217 return.

If the election is beneficial

If you file your section 217 return on time, the CRA will refund any tax withheld that is more than the amount you owe. If the payer withheld less than the required amount of non-resident tax on your eligible section 217 income, you may have a balance owing, even if the election is beneficial. Make sure you include on line 43700 of your return the non-resident tax withheld on your eligible section 217 income from your information slips.

Note

Attach a completed Schedule A, Schedule B, and Schedule C to your return. If you do not attach these schedules, the processing of your return, and any refund you may be entitled to, may be delayed. Also attach a copy of your information slips.

If the election is not beneficial

If the payer withheld more than the required amount of non-resident tax on your eligible section 217 income, you can ask for a refund of the difference by completing Form NR7-R, Application for Refund of Part XIII Tax Withheld.

If the payer withheld less than the required amount of non-resident tax because the CRA approved your Form NR5 (or for any other reason), you need to pay an amount to the CRA. The amount to pay is the difference between the required amount of non-resident tax and the amount withheld.

Reducing tax withheld (Form NR5)

If you want to make a section 217 election on eligible income that you have not yet received, you can apply for a reduction to the non-resident tax the payer would otherwise need to withhold. To do this, complete Form NR5, Application by a Non-Resident of Canada for a Reduction in the Amount of Non-Resident Tax Required to be Withheld, and send it to the CRA for approval on or before October 1, or before the first payment is due. If the CRA approves your application, you must file a section 217 return for each year in the approval period.

Note

If approved, Form NR5 is valid for a period covering five tax years. However, if your situation changes during this period, you may need to file a new Form NR5. For more information, go to Form NR5 – 5-year Administrative Policy.

The CRA will use the information you give on Form NR5 to determine if a section 217 election will benefit you. If the election is beneficial for you, the CRA will authorize your Canadian payer(s) to reduce the amount of non-resident tax withheld from your benefits during the approval period.

Before you file

Do you need to file a section 217 return?

 You must file a section 217 return for each year of the period covered by the approved Form NR5, Application by a Non-Resident of Canada for a Reduction in the Amount of Non-Resident Tax Required to be Withheld. However, even if you did not send a Form NR5 to the CRA for the year or the CRA did not approve it, you may still choose to file a section 217 return to apply for a refund of all or part of the non-resident tax withheld on the types of income that are eligible for a section 217 election.

Which tax guide should you use?

The Income Tax and Benefit Guide for Non-Residents and Deemed Residents of Canada includes the return, schedules, and information you need to complete your section 217 return.

If you emigrated from Canada in 2021, use the tax package for the province or territory where you resided on the date you left Canada.

Section 217 return due date

Your 2021 section 217 return must be filed on or before June 30, 2022. However, if you have a balance owing for 2021, you need to pay it on or before April 30, 2022, to avoid interest charges.

If you file your 2021 return after June 30, 2022, the CRA cannot accept your section 217 election according to the Income Tax Act. If you file late and the required amount of non-resident tax was withheld on your eligible section 217 income, the CRA will consider the amount withheld to be your final tax obligation to Canada on that income. However, if the payer withheld less than the required amount of tax, the CRA will send you a notice of assessment for the difference.

Note

The due date for filing your section 217 return may be different if you also report other types of Canadian-source income on this return. These types could include employment or business income, net Canadian partnership income if you are a limited or non-active partner, or taxable capital gains from disposing of taxable Canadian property. For more information, see Due dates in the Income Tax and Benefit Guide for Non-Residents and Deemed Residents of Canada.

Completing your section 217 return

To complete your 2021 section 217 return, use the information in this section and the instructions in your Income Tax and Benefit Guide for Non-Residents and Deemed Residents of Canada.

Write "Section 217" at the top of page 1 of your return.

Identification and other information

Complete this section by following the instructions in your Income Tax and Benefit Guide for Non-Residents and Deemed Residents of Canada.

Income

Report the following income on your return:

Schedule C, Electing under Section 217 of the Income Tax Act

Complete this schedule if you were a non-resident of Canada for the entire year and you are electing to file a return under section 217.

Schedule C is divided into two parts to calculate:

In Part 1 of Schedule C report your eligible section 217 income and calculate the amount of non-resident tax you are required to pay on your eligible section 217 income. The amount you calculate may be different from the non-resident tax withheld on this income. This may happen if the payer did not withhold the required amount of tax or if the CRA approved a reduction in the amount of tax to be withheld as a result of the Form NR5 you submitted.

Deductions

Claim only the deductions that apply to you as a non-resident electing under section 217. For a list of deductions, see the Income Tax and Benefit Guide for Non-Residents and Deemed Residents of Canada.

Calculating your federal tax

If you file a section 217 return, you must complete Schedule A, Statement of World Income, before you calculate your tax on your return.

Schedule A, Statement of World Income

Report your world income on Schedule A. World income is income for the year from all sources inside and outside Canada.

Your income from Canadian sources is the total of your net income (line 23600 from your section 217 return), plus other types of Canadian-source income that are not included on this return, such as dividends, interest, rental income, or worker’s compensation benefits.

Income from foreign sources (when the CRA mentions "foreign source" in this pamphlet, it is referring to sources outside Canada) includes income from employment, self-employment, pension, investment, rental, capital gains, and any other foreign-source income that you would have included on your return if you had been a resident of Canada.

You report your foreign-source income on your Schedule A, but you may also use it on your return. For more information, see Step 5 – Federal Tax.

Note
Example 1

Jeff is a resident of the United States. In 2021, Jeff’s world income (in Canadian dollars) includes the following amounts:

  • $18,000 from a pension plan in Canada
  • $500 in dividends from Canadian stocks
  • $500 interest from a savings account in the United States

Jeff elects to file a return under section 217 to have the pension income taxed at a lower rate. On his return, Jeff reports the $18,000 pension (eligible income for section 217). Since Jeff has no deductions, the taxable income on line 26000 of his return is $18,000.

Jeff does not report any bank interest or dividends on his return. The United States interest is not subject to tax in Canada but is reported on line 8 of Schedule A. The dividends from Canada are subject to non-resident withholding tax, which is Jeff’s final tax obligation to Canada on that income, and is reported on line 2 of Schedule A.

When Jeff completes Schedule A, the net world income reported on line 14 and the net world income after adjustments reported on line 16 would be $19,000.

Step 5 – Federal Tax

To calculate your tax payable, which includes the surtax for non-residents and deemed residents of Canada, you need to complete the return included in the Income Tax and Benefit Package for Non-Residents and Deemed Residents of Canada.

Enter whichever amount is more on line 68 of your return:

If you use the net world income after adjustments from line 16 of Schedule A to determine your federal tax, you need to calculate the section 217 tax adjustment amount using Part 2 of Schedule C. For more information, see Section 217 tax adjustment.

Note

If you are also reporting Canadian-source employment or business income on your return, you need to pay tax on that income to the province or territory where you earned it. To calculate your tax payable, complete Form T2203, Provincial and Territorial Taxes for Multiple Jurisdictions.

Federal non-refundable tax credits

These credits reduce your federal tax.

You can claim all of the federal non-refundable tax credits that apply to you on your return. However, under section 217 of the Income Tax Act, the amount of the credits you can use to reduce your tax may be limited.

Once you complete Part B of Step 5 of your return, complete Part B of Schedule B to calculate the allowable amount of federal non-refundable tax credits.

Schedule B, Allowable Amount of Federal Non-Refundable Tax Credits

The allowable amount of federal non-refundable tax credits depends on the portion of net world income (line 14 of Schedule A) that you included in net income (line 23600) on your section 217 return.

If you included 90% or more of your 2021 net world income in your net income, the allowable amount of federal non-refundable tax credits is the total from line 35000 of your return.

If you included less than 90% of your 2021 net world income in your net income, the allowable amount of federal non-refundable tax credits is whichever amount is less:

a) 15% of the eligible section 217 income paid or credited to you in 2021 (Schedule C also identifies this type of income and gives more detail.)

b) the total federal non-refundable tax credits you would be eligible for if you were a resident of Canada for the full year (from line 35000 of your return) minus 15% of the total of the following amounts, if any:

Example 2

In example 1, Jeff’s net world income was $19,000. To calculate the tax payable, Jeff will enter on line 68 of the return whichever amount is more:

  • Jeff's taxable income reported on line 26000 of the return                                                  $18,000
  • Jeff’s net world income after adjustments from line 16 of Schedule A                               $19,000

Jeff has included on his return 90% or more of the net world income. He calculated the percentage on Schedule B as follows:

$18,000 (net income on the return) ÷ $19,000 (net world income on Schedule A) = 95%

As a result, Jeff can claim all of the federal non-refundable tax credits (from line 35000 of the return) that would have applied if he was a resident of Canada throughout 2021.

Example 3

If Jeff also earned $12,000 in interest from United States treasury bonds which does not have to be reported on the Canadian return, he would no longer be including 90% or more of the net world income on his return:

$18,000 (net income on the return) ÷ $31,000 (net world income on Schedule A) = 58%

Since Jeff has not included 90% or more of the 2021 net world income on his section 217 return, his allowable federal non-refundable tax credits are limited to whichever amount is less:

a) $2,700 (15% of Jeff’s income eligible for the section 217 election, which is the pension income of $18,000)

b) the total federal non-refundable tax credits entered on line 35000 of Jeff’s return minus 15% of the total of the following amounts, if any:

Section 217 tax adjustment

If the amount you enter on line 68 of your return is your net world income after adjustments (line 16 of Schedule A), you need to calculate the section 217 tax adjustment.

Your net world income after adjustments may include foreign-source income, which is not taxable in Canada, and Canadian-source income like interest, dividends, or rental income, which is not included in the taxable income on your return. This adjustment reduces your federal tax by the portion of taxes that apply to this income

Note

You will find the calculation for the section 217 tax adjustment in Part 2 of Schedule C.

Tax payable

The amount on line 43500 of your return is your tax payable if you make the election under section 217.

Part-year residents electing under section 217

Special rules may apply if you are a part-year resident.

You must report your world income for the part of the year you were a resident of Canada, and all section 217 income for the part of the year you were a non-resident. For more information about reporting world income, see the Income Tax and Benefit Guide for Non-Residents and Deemed Residents of Canada.

As a part-year resident electing under section 217, you are subject to provincial or territorial taxes instead of the surtax for non-residents and deemed residents of Canada.

Refund or balance owing

Line 46900 – Eligible educator school supply tax credit

If you included in your net income 90% or more of your 2021 net world income (line 14 of Schedule A) and you were an eligible educator, you can claim an amount for eligible supplies you purchased in 2021.

For more information, see line 46900 of the Income Tax and Benefit Guide for Non-Residents and Deemed Residents of Canada.

For more information

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By mail

By mail - non-residents
If you are a non-resident of Canada and your country of residence is: Send your section 217 return and related documents to:
Denmark
France
Netherlands
United Kingdom
United States
Winnipeg Tax Centre
PO Box 14001, Station Main
Winnipeg MB  R3C 3M3
Any other country Sudbury Tax Centre
1050 Notre Dame Avenue
Sudbury ON  P3A 5C2
By mail - Provinces or area in Ontario
If you immigrated to Canada in 2021 and you live in one of the following provinces or territories, or areas of Ontario: Send your section 217 return and related documents to:
Alberta, British Columbia, Manitoba,
Saskatchewan, Northwest Territories,
Nunavut, Yukon

Ontario: Belleville, Hamilton, Kingston,
Kitchener, London, Ottawa,
Peterborough, St. Catharines,
Thunder Bay, Waterloo, Windsor
Winnipeg Tax Centre
PO Box 14001, Station Main
Winnipeg MB  R3C 3M3
New Brunswick, Newfoundland and
Labrador, Nova Scotia,
Prince Edward Island, Québec

Ontario: Barrie, Sudbury, Toronto
Sudbury Tax Centre
1050 Notre Dame Avenue
Sudbury ON  P3A 5C2
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