Toronto Maple Leafs' captain John Tavares takes CRA to court over $8M tax dispute

Maple Leafs captain dropping gloves with CRA Toronto Maple Leafs captain John Tavares is taking the CRA to court over millions the tax agency says he owes over a signing bonus.

Toronto Maple Leafs captain John Tavares is taking the Canada Revenue Agency to court over an $8-million tax dispute, according to court documents filed on behalf of the player.

Lawyers for Tavares, 33, filed an appeal in the Tax Court of Canada last week seeking to set aside a CRA reassessment of the return, which found Tavares’ income that year to be $17.8 million higher than he reported.

In its reassessment, the CRA ordered Tavares to pay a rate of 38 per cent on the bonus – plus interest – totalling an additional $8 million, the appeal states.

According to Tavares’ claim, the difference stems from a miscalculation by the CRA of taxes owed on the US$15.3 million signing bonus paid to him by the Toronto Maple Leafs. The appeal argues the bonus should have only been taxed at 15 per cent under a provision of the Canada-U.S. taxation treaty that sets lower rates for “inducements” paid to athletes, artists, actors, or musicians.

The bonus is different from salaried income and should not be considered as such by the CRA, it argues. The appeal also says the bonus was paid into an American bank account and that Tavares spent only 45 days in Canada between September and December of 2018, once playing with the Maple Leafs. In turn, it argues that the 2018 portion of the bonus should be taxed at the 15 per cent inducement rate.

As of Wednesday, the claims have not been tested in court and the Canadian Revenue Agency has not filed a response to Tavares’ appeal.

CTV News Toronto reached out to the CRA and legal representation for Tavares for further comment.

‘Integral’ to the deal

On July 1, 2018, Tavares signed a seven-year, $77-million deal with the Maple Leafs.

The offer wasn't his highest, according to the filing. It states that the "marquee" player got considerable interest from an array of teams, including the San Jose Sharks, Boston Bruins, Tampa Bay Lightning and Dallas Stars. Ultimately, Tavares chose his hometown team, with the filing identifying the signing bonus as an "integral" part of the player's decision.

“The signing bonus was consideration for Tavares — a uniquely skilled and sought-after unrestricted free agent — committing to the seven-year Contract with the Toronto Maple Leafs,” it reads. "He rejected higher-paying offers from other teams, including a seven-year, $91 million offer from the San Jose Sharks."

The $17.8 million bonus payment referenced in the appeal represents only the first yearly payment of Tavares’s entire signing bonus, which totals US$70.9 million over the term of his contract.

Tavares went on to be named the 25th captain of the Maple Leafs in 2019 after scoring a career-high 47 goals and 88 points in his first season with the team.