What is a section 217 election?

You have left Canada and you are happy to be considered a non-resident of Canada for tax purpose. However, you may be still paying taxes if you earn income from Canada. Canadian payers are required to withhold non-resident tax on certain types of income they pay to non-residents, including pension income. Depending on the treaty withholding rate for the country you lives in, this withholding tax can be as high as 25% of your income.

The tax whithheld is usually your final tax obligation to Canada and you do not have to file a Canadian income tax return to report it.  However, Section 217 of the Income Tax Act permits non-residents of Canada to elect to file a Canadian tax return if tax savings can be achieved. If you, an non-resident, choose to file a tax return under section 217, you may pay tax on the eligible income using alternative method and my receive a refund of some or all of the non-resident tax withheld. Section 217 election is voluntary. You are not required to do so if you would not receive any tax refund from filing the return.

The rationale behind Section 217 is that it gives non-residents options so that they will not be in a worse tax position than if the taxpayer was a resident of Canada. By filing such an election, the non-resident is able to claim the same deductions and credits to which a resident Canadian taxpayer is allowed.

Section 217 return has to be filed within 6 months of the tax year end in order for the election to be valid. However, if there is a balance owing, you have to pay it by April 30 of the year following the year of receipt of income to avoid interest charge.