there is a difference between Section 217 and Section 216 for non-residents of Canada. These sections apply to different types of income and have different tax implications.
Section 217 (Canadian Benefit Income)
Who is it for?
If you are a non-resident but receive certain types of income from Canada, you may choose to be taxed as a resident (if it is more beneficial). Eligible income includes:
- Pension income (such as OAS, CPP/QPP, or employer pensions)
- Employment Insurance (EI) benefits
- Old Age Security (OAS) payments
- Disability benefits
- Withdrawals from a Registered Retirement Savings Plan (RRSP)
- Lifetime annuity payments
Why choose Section 217?
- Normally, these types of income are subject to a flat 25% withholding tax for non-residents.
- However, by choosing Section 217, you can be taxed at regular resident rates, which may result in a tax refund if your total taxable income is low.
- If the tax amount calculated using resident rates is lower than the 25% withholding tax, you could get a refund.
Section 216 (Rental Income)
Who is it for?
If you are a non-resident earning rental income from Canada, you can choose to pay tax on your net rental income instead of having 25% withheld on the gross rental income. Eligible income includes:
- Rental income from Canadian real estate
- Timber royalties
Why choose Section 216?
- By default, the Canada Revenue Agency (CRA) applies a 25% withholding tax on the gross rental income.
- However, by choosing Section 216, you can deduct property-related expenses (such as repairs, property management fees, mortgage interest, etc.) and pay tax only on the net rental income, which can significantly reduce your tax liability or even result in a refund.
Comparison Summary
| Category | Section 217 | Section 216 |
|---|---|---|
| Applicable Income | Pension income, EI, RRSP withdrawals, OAS, etc. | Rental income, timber royalties |
| Default Tax Rate | 25% withholding tax | 25% withholding tax |
| Tax Filing Option | Choose to be taxed as a resident, potentially leading to a refund | Taxed on net rental income instead of gross, reducing tax liability |
| Who Should Consider It? | Non-residents receiving Canadian benefits or pensions | Non-residents earning rental income from Canadian properties |
If you receive pension or benefit income from Canada and your total taxable income is low, Section 217 could help you get a tax refund.
If you own rental property in Canada, Section 216 allows you to deduct expenses and lower your taxable income.
Hi,
I am a section-217 deemed non-resident. I am credited a once-a-year minimum RRIF withdrawal. Is this yearly amount eligible for my RCA-approved reduced tax rate of 7% or does the 25% tax rate automatically apply?
Answer to Your Question:
If the RRIF withdrawal is the annual minimum amount and you:
*Reside in a treaty country that provides a 7% rate on RRIF minimum withdrawals;
*Have CRA approval (e.g., via RCA application or NR5 form);
*And the withdrawal is not exceeding the minimum;
The above response is not intended as professional advice and is for reference only.
Then yes, the 7% rate can apply to the RRIF minimum withdrawal, instead of the 25% default rate.