Section 216 vs Section 217: Which Canadian Non-Resident Tax Return Applies to You?

Last updated: Dec 13,  2025

Non-residents of Canada are often surprised to learn that having tax withheld at source does not always settle their Canadian tax obligations. Two commonly misunderstood provisions; Section 216 and Section 217 of the Income Tax Act allow certain non-residents to file a Canadian tax return even after leaving the country.

Understanding the difference between these two filings is critical. Choosing the wrong one or failing to file when beneficial can result in unnecessary tax costs, missed refunds, or compliance issues.

What Is a Section 216 Return?

Section 216 applies to non-residents who earn rental income from Canadian real estate. By default, rental income paid to a non-resident is subject to non-resident withholding tax, generally calculated at 25% of the gross rent. This tax is typically remitted monthly by the tenant or a Canadian property manager under Part XIII of the Income Tax Act.

A Section 216 return allows the non-resident to elect to file a Canadian tax return reporting net rental income, after deducting eligible expenses such as mortgage interest, property taxes, insurance, repairs, utilities, and management fees. In many cases, the tax payable on net income is significantly lower than the tax withheld on gross rent, resulting in a refund.

Although filing under Section 216 is optional, it is frequently advantageous where expenses are substantial or where the rental property generates only modest profits.

It is also important to note that non-residents may apply to have tax withheld on net rental income rather than gross rent by filing Form NR6, subject to CRA approval. Where an NR6 is in place, the non-resident must file a Section 216 return by June 30 of the following year. Without an NR6, a Section 216 return can generally be filed within two years after the end of the year in which the rental income was paid or credited.

What Is a Section 217 Return? 

Section 217 applies to certain types of Canadian-source pension and retirement income received by non-residents. This commonly includes Old Age Security (OAS), Canada Pension Plan (CPP/QPP), many employer pensions, and most RRSP or RRIF withdrawals, among other specified Canadian benefits.

For non-residents, this income is normally subject to non-resident withholding tax at source, either at the domestic rate or a reduced rate under an applicable tax treaty. By filing a Section 217 return, the non-resident can elect to have this income taxed as if they were a Canadian resident, but only for the qualifying income covered by the election.

This election allows access to graduated tax rates and personal tax credits, which can significantly reduce the overall tax liability. Where withholding exceeds the tax calculated under this method, a refund may be available.

Section 217 filings are often beneficial for individuals with lower or moderate levels of Canadian pension income, particularly where treaty-reduced withholding still exceeds what would be payable under resident tax rates.

A Section 217 return must generally be filed by June 30 of the year following receipt of the income. If the return is filed late, the CRA may refuse to accept the election, eliminating the opportunity to recover excess withholding.

Can You File Both Section 216 and Section 217 in the Same Year?

Yes. A non-resident can file both a Section 216 return and a Section 217 return in the same tax year, provided they have qualifying income under each provision. For example, an individual who earns rental income from Canadian real estate and also receives CPP or RRIF income may file separate returns under each section.

Each return applies only to the specific income it covers and is assessed independently. This is an area where errors are common, as many taxpayers assume only one non-resident return can be filed per year.

Common Mistakes Non-Residents Make

One of the most frequent errors is assuming that withholding tax is always final. In many cases, withholding represents a conservative estimate and does not reflect the actual tax liability once deductions, credits, or graduated rates are applied.

Another common issue is filing the wrong type of return or failing to file altogether when a refund opportunity exists. Missing filing deadlines, particularly for Section 217 elections or Section 216 filings tied to an NR6, can permanently eliminate the ability to recover excess tax.

These mistakes are often costly but entirely avoidable with proper analysis.

How Do Tax Treaties Affect Sections 216 and 217? 

Canada’s tax treaties, including the Canada–U.S. tax treaty, often reduce non-resident withholding rates on rental income and pension payments. However, treaty relief does not automatically eliminate the benefit of filing a Section 216 or Section 217 return.

Even where withholding is reduced under a treaty, the tax withheld may still exceed the amount payable under a net income or graduated-rate calculation. As a result, elective filings remain an important tool for minimizing Canadian tax exposure and coordinating Canadian tax results with foreign tax reporting.

Final Thoughts

Sections 216 and 217 are not loopholes. They are deliberate mechanisms designed to ensure non-residents are taxed fairly on Canadian-source income. The challenge lies in understanding when these provisions apply, how filing deadlines differ, and how they interact with withholding tax and treaty relief.

For former Canadian residents with ongoing rental or pension income, selecting the correct filing approach can materially affect both compliance and tax efficiency. Addressing these issues proactively helps avoid missed refunds, penalties, and unnecessary complications in future years.

Frequently Asked Questions (FAQs) 

What is the difference between a Section 216 and Section 217 return? 

A Section 216 return applies to Canadian rental income earned by non-residents, allowing tax to be calculated on net income instead of gross rent. A Section 217 return applies to certain Canadian pension and retirement income, allowing non-residents to elect resident tax rates and personal credits. Each section applies to different income types and is filed separately. 

Do non-residents have to file a Section 216 return for rental income?

Filing a Section 216 return is optional, but often beneficial. Without filing, the default 25% withholding on gross rent is generally considered final. Filing a Section 216 return allows deductible expenses to be claimed and can result in a refund if the withholding exceeds the actual tax payable.

When is a Section 216 return due?

If no NR6 form is in place, a Section 216 return can generally be filed within two years after the end of the year in which the rental income was paid or credited. If an NR6 has been approved, the Section 216 return must be filed by June 30 of the following year.

Who should consider filing a Section 217 return?

Non-residents receiving CPP, OAS, pensions, or RRSP/RRIF withdrawals should consider a Section 217 return if their total Canadian income is relatively modest or if treaty-reduced withholding still exceeds what would be payable using graduated tax rates and credits.

What is the deadline for filing a Section 217 return? 

A Section 217 return must generally be filed by June 30 of the year following receipt of the income. If filed late, the CRA may refuse to accept the election, eliminating the ability to recover excess withholding. 

Can a non-resident file both a Section 216 and Section 217 return in the same year?

Yes. A non-resident can file both returns in the same tax year if they have qualifying rental income and qualifying pension or retirement income. Each return applies only to the specific income covered by the election.

Does a tax treaty eliminate the need to file under Section 216 or Section 217? 

Not necessarily. While tax treaties may reduce withholding rates, the tax withheld may still exceed the amount payable under a net income or graduated rate calculation. Filing under Section 216 or Section 217 can still result in a refund even when treaty rates apply. 

What happens if a non-resident does not file a Section 216 or Section 217 return? 

If no election is filed, the withholding tax is generally treated as final. This may result in overpayment of Canadian tax and lost refund opportunities. Missing deadlines can permanently eliminate the ability to recover excess withholding.

Should non-residents seek professional advice before filing? 

Yes. Determining whether a Section 216 or Section 217 election is beneficial depends on income levels, expenses, treaty relief, and coordination with foreign tax filings. Professional advice helps ensure compliance while minimizing overall tax exposure.