Does the section 217 election apply to you?

As a non-resident of Canada, passive income (dividends, interest, pensions, etc.) paid or credited to you is generally subject to withholding tax of 25%. This withholding represents Part XIII tax. This could normally be reduced by the tax treaties in force.

No Canadian income tax return is required when these amounts are paid to you. However, for rental income from real estate located in Canada, you have the option of declaring this income on a separate Canadian income tax return.

Electing under section 217

An election under section 217 of the Income Tax Act is also available for pension plans (Quebec Pension Plan and Registered Retirement Savings Plan, for example) and most pension income, collectively referred to as “qualifying Canadian source income”.

This tax choice may be advantageous if your income, otherwise subject to withholding tax of 25% (or less), is taxable at a higher rate than if it were reported on a Canadian income tax return. Under this election, your eligible income from Canadian sources would be taxable as if you were a resident of Canada. However, your worldwide source income should be taken into account when calculating the tax rate.

We therefore advise you to contact one of our tax experts to confirm whether the choice provided for in section 217 is advantageous for you since several parameters must be analyzed. The “Electing Under Section 217” return must generally be filed no later than June 30, but any balance due is payable on April 30.

To know more

This article does not cover all the things to consider when choosing. So, if you want to know more, don’t hesitate to make an appointment with one of our tax experts. We are used to dealing with these situations and will be able to advise you well.

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About the author

Olivier Custeau, tax expert, B.A.A., M. Fisc., EA

Holder of a bachelor's degree in business administration (B.B.A) from Université Laval and a master's degree in taxation (M. Fisc.) from the Université de Sherbrooke, Olivier has developed expertise in American and international taxation by working in a renowned firm. Over the years, he has developed a keen interest in US taxation. In fact, he was awarded Enrolled Agent status in 2019, the highest level a professional can attain to represent clients to the Internal Revenue Service (IRS). Recognized for his rigorous, dynamic and human approach, Olivier is an asset to the team.