I moved abroad, why is tax taken off my Canadian pension?
Because periodic amounts paid out of Canada to someone living elsewhere are taxed by withholding on the gross amount, deducted by the payer and remitted on your behalf. It is not an error and it is not something the payer can stop doing as a favour. A tax treaty with the country you now live in may reduce the rate, and that reduction has to be claimed with evidence of your residence rather than assumed. Beyond the treaty, the route to a different result is the elective return under Section 217, which is a filing you choose to make.
Can I get back the tax withheld on my Canadian pension?
Sometimes, and the mechanism is an election rather than a request. Section 217 lets the Canadian tax on those amounts be recomputed at graduated rates, with the withholding treated as money already on account; if the recomputed figure is lower, the difference comes back. If it is higher, you do not make the election and the withholding stands. So it is worth testing every year rather than adopting as a policy, because the answer moves with the size of your pension, the credits available to you, and what else you receive from Canadian sources.
Is a Section 217 return worth filing on a small pension?
A small pension is precisely where it is worth testing, because graduated rates start low and a flat withholding on a modest amount can easily exceed what the graduated calculation produces. Two things decide it. The first is the total of the Canadian amounts the election covers. The second is whether you can reach the personal credits, which depends on what proportion of your worldwide income for the year is Canadian-source. Someone whose income is almost entirely a Canadian pension is in a very different position from someone with substantial earnings in their new country, even where the pensions are identical.
Will my Canadian pension be taxed twice if I live abroad?
Usually not twice over, but the relief has a direction and it matters which way round it runs. Typically the country you live in taxes the pension as a resident and gives credit for the Canadian tax, within limits set by its own rules and by the treaty. That is why the election is not a decision to take on the Canadian numbers alone: reducing the Canadian tax can reduce the credit available where you live, so the saving is smaller than it looks and can occasionally disappear altogether. Work out both sides before electing rather than afterwards.
What income can go on a Section 217 return?
The section covers a defined list of periodic amounts rather than everything you receive from Canada: retirement pensions, government retirement benefits, annuity payments, withdrawals from registered retirement plans and certain amounts paid on leaving employment are the familiar ones. Receipts outside the list stay where they are and are not improved by electing. This matters because a year's receipts often mix the two, and the arithmetic only works once each amount has been placed correctly. Ask each payer for the annual information slips rather than working from bank credits, because the slips say which category an amount fell into.
Can I file a Section 217 return for an earlier year?
The election has a filing deadline of its own for each year, and where that has gone by, the withholding is the final Canadian tax for the year. Nothing about a later election reopens it. The other half of the point is more encouraging: each year is tested separately, so electing once does not commit you and declining once does not disqualify you. If you have several years behind you, establish which of them are still open before computing anything, then test each open year on its own figures rather than assuming the answer repeats.
How does a non-resident file a tax return?
On the non-resident form for that country, reporting only the income that country may tax. In the US that is the 1040-NR; in Canada it is a T1 restricted to Canadian-source amounts, plus the elective returns under sections 216 and 217 where withholding on rent or pension income exceeded the real tax. The commonest error is filing the resident form by default and reporting worldwide income to a country with no right to it. See Form 1040-NR.
How much foreign income is tax-free in Canada?
None of it is tax-free for being foreign. A Canadian resident is taxed on worldwide income, so foreign salary, interest, dividends, rent and gains all go on the return, converted to Canadian dollars. What genuinely reduces the bill is the basic personal amount, the credit for foreign tax already paid, and any treaty article that exempts a specific type of income. The reporting thresholds people have in mind — the foreign property statement, for one — govern reporting, not exemption. See the foreign tax credit.
