The federal government is challenging Toronto Maple Leafs captain John Tavares’ $8 million tax dispute with the Canada Revenue Agency, arguing that he owes taxes on additional income reported in his 2018 tax return. Tavares signed a $77 million contract with the Leafs in 2018, and the CRA determined that his income was $17.8 million higher than reported, resulting in a tax bill of $6.8 million plus interest. Tavares argues that this amount was a signing bonus and should not be considered salary or wages for tax purposes.
According to Tavares’ appeal, the signing bonus was a significant factor in his decision to accept the contract with the Leafs. The appeal also states that Tavares was eligible for a reduced tax rate of 15% under a Canada-U.S. Tax Treaty provision for inducements paid to athletes. The bonus amount was deposited into his New York City bank account, and he spent 45 days in Canada during the relevant time period. Tavares’ contract includes $70.89 million in signing bonus money and $6.11 million in base salary, which he argues is different from salary because it is payable regardless of his playing status.
The Attorney General of Canada (AGC) disputes Tavares’ claim that the signing bonus should be subject to the reduced tax rate, arguing that the bonus was salary, wages, or other remuneration received by Tavares while he was a resident of Canada in 2018. The AGC also points to the NHL Collective Bargaining Agreement, which defines the League Year as starting on July 1, the same day Tavares signed his contract with the Leafs. The AGC contends that the entire signing bonus should be included in Tavares’ income for tax purposes.
Tavares’ lawyer did not respond to requests for comment on the matter. The claim has not yet been tested in court, and a hearing has not yet been scheduled in the Tax Court of Canada. It remains to be seen how the court will rule on Tavares’ appeal and the government’s arguments regarding his tax liability. The dispute highlights the complexities of income taxation for professional athletes and the need for careful consideration and guidance when negotiating contracts and handling tax matters.
