John Tavares Takes Canada Revenue Agency to Court Over $8 Million Tax Dispute

Toronto Maple Leafs captain John Tavares is launching a legal battle against the Canada Revenue Agency (CRA) over an ongoing $8 million tax dispute, as per court documents filed on his behalf.

Tavares, who is 33 years old, submitted an appeal to the Tax Court of Canada last week, aiming to overturn the CRA’s reassessment of his return. The CRA states that Tavares’ income for that year was $17.8 million higher than what he reported.

The CRA’s reassessment requires Tavares to pay a rate of 38 percent on the bonus, amounting to an additional $8 million, plus interest, as mentioned in the appeal.

According to Tavares’ claim, the discrepancy arose due to an incorrect calculation by the CRA regarding the taxes owed on the US$15.3 million signing bonus he received from the Toronto Maple Leafs. The appeal argues that this bonus should have been taxed at a lower rate of 15 percent, as outlined in the Canada-U.S. taxation treaty for “inducements” given to athletes, artists, actors, or musicians.

The appeal emphasizes that the signing bonus should not be considered as part of Tavares’ salaried income and points out that it was deposited into an American bank account. Furthermore, Tavares asserts that he spent only 45 days in Canada between September and December of 2018, during which time he played with the Maple Leafs. Hence, the appeal argues that the 2018 portion of the bonus should be taxed at the 15 percent inducement rate.

It is essential to note that these claims have not yet been tested in court, and the Canadian Revenue Agency has not yet responded to Tavares’ appeal.

CTV News Toronto has reached out to both the CRA and Tavares’ legal representation for additional comments.

Tavares, who signed a seven-year, $77 million contract with the Maple Leafs on July 1, 2018, turned down higher-paying offers from various teams, including the San Jose Sharks, Boston Bruins, Tampa Bay Lightning, and Dallas Stars. The appeal acknowledges the importance of the signing bonus in Tavares’ decision to choose his hometown team.

The $17.8 million bonus payment mentioned in the appeal represents only the first installment of Tavares’ total signing bonus, which amounts to US$70.9 million over the entire duration of his contract.

In 2019, Tavares had a successful season with the Maple Leafs, scoring a career-best 47 goals and 88 points, earning him the captaincy of the team.