The captain of the Toronto Maple Leafs is embroiled in a lawsuit regarding the taxes of his signing bonus.
According to Glen McGregor of the National Post, Tavares will go to court with the Canada Revenue Agency. The agency says that the Toronto native owes more than $8 million in taxes and interest on the $15.25 million signing bonus Tavares got when he joined the Maple Leafs in 2018.
Tavares filed an appeal in the Tax Court of Canada last week, through his lawyers, requesting that the CRA reverse the evaluation of his 2018 tax return.
According to the article, the appeal alleges that the CRA erroneously estimated Tavares’ owing taxes on the signing bonus. He claims the incentive should have only been taxed at 15% under a Canada-U.S. tax treaty provision that sets a reduced tax rate for “inducements” like signing bonuses.
The CRA has yet to respond to the appeal, but has determined that Tavares must pay 38% of the bonus plus interest. None of the charges were proven in court.
The outcome of this legal dispute could have long-term implications for Canadian teams looking to attract high-profile players. It is well-known that certain players have teams north of the border.
It is well known that several players put teams north of the border on their no-trade lists in order to avoid paying higher taxes. That is why no-income-tax areas like Florida and Nevada are popular with players hoping to make a lot of money.
The outcome of this tax dispute could prevent Tavares from resigning with his hometown team. The 33-year-old is on the sixth year of a seven-year contract with an AAV of $11 million, the majority of which was paid through signing bonuses. Tavares’ base pay has been no higher than $910,000 per year since the 2019-20 season.
