Can You Get Back the 25% Canada Withholds From Your Pension After Aliyah?
Often, yes. Once you are a non-resident of Canada, the default is a flat 25% Part XIII tax skimmed off your RRSP, RRIF, OAS, CPP, and pension before it ever reaches your Israeli account4. The Section 217 election lets you instead file a Canadian return and be taxed on that Canadian-source income at the normal graduated rates a resident pays1. For a modest-income retiree that graduated bill is usually well below 25%, so the difference comes back as a refund.
Not advice
This is one of the most under-used cross-border moves for Canadian olim, and almost every new arrival is blindsided by it twice. First they are surprised that Canada keeps taxing their pension at all after they leave; then they assume the 25% taken at source is simply their final tax and there is nothing to be done. For lower-income retirees, that second assumption can quietly cost thousands of Canadian dollars a year. A native Israeli retiree never confronts any of this, because they have no Canadian-source pension and no Canadian return to file.
Canadian side: what is the default 25% withholding?
When you become a non-resident of Canada, Canadian payers must deduct non-resident tax, usually 25%, from most Canadian-source amounts they pay or credit to you, and remit it to the Canada Revenue Agency (CRA)4. This is a final, flat tax under Part XIII of the Income Tax Act: no personal credits, no graduated brackets, no return required. The payer simply withholds and you receive the net.
The income types caught are exactly the ones a retired oleh lives on: Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) benefits, Old Age Security (OAS), registered-pension payments, and withdrawals from an RRSP or RRIF2. The same 25% applies to an RRSP or RRIF you collapse after aliyah, which is one reason the "cash it all out" instinct can be expensive.
Does the Canada-Israel treaty lower that rate?
For some of it, yes. The default 25% can be reduced by a tax treaty4. Under the Canada-Israel Tax Convention, tax on a periodic pension payment arising in Canada and paid to an Israeli resident is capped at the lesser of 15% of the gross payment, or the tax the recipient would owe if they were a Canadian resident6. That second limb is important: it is the treaty quietly pointing at the same graduated-rate outcome the Section 217 election gives you, which is why the two tools are best understood together rather than in isolation.
What is the Section 217 election, and who is it for?
Section 217 is an optional election. Instead of letting the flat withholding be your final tax, you choose to file a regular Canadian income-tax return and report your eligible Canadian-source income on it, so it is taxed at the ordinary federal graduated rates rather than at the flat non-resident rate1. The Part XIII tax already withheld during the year is then treated as an instalment against that graduated bill, and the CRA refunds any excess1.
Eligible income for the election includes CPP and QPP benefits, OAS, registered-pension payments, RRSP and RRIF payments, and a handful of other listed Canadian-source amounts2. The election fits one profile cleanly: lower-income retirees whose total income, taxed at graduated rates with their available credits, would attract less than the flat 25% (or 15% treaty) already taken. It does not help higher-income retirees: if your graduated-rate tax would exceed what was withheld, electing simply raises your Canadian bill, so you do not file the election and let the withholding stand.
The election is a calculation, not a default
What is the filing deadline?
Strict and unforgiving: the CRA cannot accept a Section 217 election filed after June 30 of the year following the year the income was paid3. Miss that date and the 25% (or 15% treaty rate) withholding is your final Canadian tax for that year, with no later refund route through this election. Because the deadline is months earlier than a resident's ordinary filing date, it is the single thing olim most often let slip.
Worked example: CAD 18,000 of Canadian pension, home vs Israel framing
Take Miriam, who made aliyah and now lives in Jerusalem. In the year she receives CAD 18,000 of eligible Canadian-source pension income (a registered pension plus CPP), and it is her only income. Here is how the same CAD 18,000 is treated by Canada with and without the election, and by Israel.
| Treatment of CAD 18,000 pension | Canadian tax outcome | What Miriam keeps / gets back |
|---|---|---|
| Default: flat Part XIII withholding at 25%4 | CAD 4,500 withheld, treated as final; no return filed | Net CAD 13,500; no refund |
| Treaty rate on the periodic-pension portion, capped at 15%6 | Up to CAD 2,700 withheld on a fully periodic pension; still flat, still final without a return | Net up to CAD 15,300; no refund |
| Section 217 election: file a return, graduated rates apply1 | Graduated-rate tax on CAD 18,000 (after the credits a section 217 return allows) is far below 25%; the withheld tax is credited against it5 | Refund of the over-withheld amount; keeps materially more |
Canada: without the election Miriam loses CAD 4,500 flat (or up to CAD 2,700 if every dollar qualifies for the treaty pension rate). With a Section 217 return, her CAD 18,000 is taxed on the graduated scale a resident faces; on income that low the tax is a fraction of 25%, so most of the withheld amount comes back as a refund1. The exact figure depends on her credits and the special limits a section 217 return imposes, which is why the T4145 worksheets exist5.
Israel: the same CAD 18,000 is foreign-source income to her. As a new resident inside the 10-year window she pays no Israeli מס הכנסה (mas hachnasa) on it7. Because there is no Israeli tax on this income, there is nothing to offset and no foreign-tax-credit tug-of-war: every Canadian dollar she recovers through Section 217 is a clean gain, not something Israel will claw back.
How does Israel tax this Canadian pension during the 10-year exemption?
New and returning Israeli residents get a 10-year exemption on foreign-source income, which covers Canadian pension, CPP, OAS, and RRSP/RRIF income received during that window7. For most of the exemption's history this also meant you did not have to report the income at all. That has changed.
The 1 January 2026 reporting reform
Treaty coordination: how Section 217 and the foreign-tax-credit interact
Because Israel does not tax this income during the 10-year exemption, the usual cross-border machinery mostly switches off. There is no Israeli tax bill, so there is no Israeli foreign-tax-creditto claim for the Canadian tax you paid, and no risk of the same income being taxed twice in the same year. The Canada-Israel treaty's 15% periodic-pension cap and the Section 217 graduated-rate route are therefore both about reducing the Canadian side, not about resolving a clash between two live tax bills61.
The picture shifts after the 10-year exemption ends. From year 11 the same Canadian pension becomes taxable in Israel too, and at that point you would claim an Israeli foreign-tax-credit for the Canadian tax paid, and the choice between accepting withholding, using the treaty rate, and electing under Section 217 has to be re-modelled against your live Israeli liability. The right answer in year 3 of aliyah is not automatically the right answer in year 12.
Once you are a non-resident of Canada, the default is a flat 25% Part XIII withholding tax skimmed off your RRSP, RRIF, OAS, CPP, and registered-pension payments before they reach your Israeli account, reduced to 15% on periodic pension payments under the Canada-Israel treaty. The optional Section 217 election lets you instead file a regular Canadian return and have that Canadian-source income taxed at the normal graduated federal rates a resident pays, with the tax already withheld credited against the lower bill. For a modest-income retiree the graduated tax is usually well below 25%, so most of the withheld amount comes back as a refund. The election is a calculation, not a default: it helps lower-income retirees and you simply do not file it if your graduated-rate tax would come out higher. The deadline is strict, the CRA cannot accept a Section 217 election filed after June 30 of the year following the year the income was paid. On the Israeli side this Canadian pension is foreign-source income covered by the new-resident 10-year exemption, now report-but-still-exempt for olim arriving from 1 January 2026, so there is no Israeli tax to credit and every Canadian dollar recovered is a clean gain.
No. It is entirely optional and only worth filing when it helps you. If your graduated-rate Canadian tax would come out below the 25% (or 15% treaty) already withheld, you elect and claim the refund. If it would come out higher, you do not file the election, and the flat withholding stands as your final Canadian tax.
Eligible income for a Section 217 election includes CPP and QPP benefits, OAS, registered-pension payments, and RRSP and RRIF payments, among other listed Canadian-source amounts. These are precisely the income streams most retired Canadian olim depend on, which is why the election is worth checking every year you receive them.
The CRA cannot accept a Section 217 election filed after June 30 of the year following the year the income was paid. Miss it and the non-resident withholding (25%, or the 15% treaty rate on periodic pensions) is final for that year, with no refund through this route. Mark June 30, because it falls earlier than the ordinary Canadian filing date.
No. The exemption is an Israeli rule about Israeli tax on foreign-source income, and the Section 217 election is a Canadian rule about Canadian tax. They operate on different sides. The only Israeli wrinkle is the 1 January 2026 reporting reform, which makes the income report-but-still-exempt for olim arriving from that date.
Be careful: a lump-sum RRSP or RRIF withdrawal by a non-resident is hit by the same flat 25% Part XIII withholding, and a large one-off payment can push your graduated-rate result above the withheld amount, removing the Section 217 benefit for that year. Spreading withdrawals and modelling each year separately usually beats a single collapse. Get cross-border advice before acting.
You do, directly to the CRA, using the section 217 return and the T4145 guide's worksheets. The Canadian payer handles the withholding and issues you an NR4 slip; you (or a cross-border accountant you engage) prepare and file the election by June 30. No Israeli body is involved in the Canadian filing.
