The captain of the Toronto Maple Leafs finds himself in a battle over the taxation of his signing bonus.
According to Glen McGregor of the National Post, Tavares is going to court with the Canada Revenue Agency. The agency claims that the Toronto native owes over $8 million in taxes and interest, which comes from the $15.25 million signing bonus Tavares received when he made the move to join the Maple Leafs in 2018.
Last week, Tavares filed an appeal, through his lawyers, in the Tax Court of Canada, hoping to have the CRA set aside the reassessment of his 2018 tax return.
According to the report, the appeal claims that Tavares’ owed taxes on the signing bonus were incorrectly calculated by the CRA. He is arguing the bonus should have only been taxed at 15 percent under a Canada-U.S. taxation treaty provision, which has a lower tax rate set for “inducements” such as signing bonuses.
The CRA has yet to file a response to the appeal, but assesses that Tavares must pay a rate of 38% on the bonus, plus interest. None of the allegations have been proven in court.
The outcome of this legal battle could have a lasting effect on teams in Canada who want to add big-name players. It is widely known that some players specifically have teams north of the border on their no-trade lists, in order to avoid paying higher taxes. That is why no-income-tax states like Florida and Nevada are hot destinations for players looking to make a big buck.
The result of this tax dispute could potentially deter Tavares from re-signing with his hometown team. The 33-year-old is in the sixth year of a seven-year contract with an AAV of $11 million, most of which has been paid by signing bonuses. Tavares’s base salary has been no more than $910,000 a year since the 2019-20 season.
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