If they’re not going to be winning championships, Canada’s sports stars at least want their full signing bonus.
What happened: Toronto Maple Leaf John Tavares was in court this week fighting the Canada Revenue Agency (CRA) over a disputed $8 million tax bill tied to his US$15.3 million signing bonus from 2018. The former captain claims the CRA miscalculated what he owes.
The CRA determined that Tavares failed to pay taxes on the bonus as part of his salary (which is taxed at ~38%) and owes over $8 million in back taxes, plus interest.
Catch-up: Bonuses for U.S.-resident athletes joining a Canadian team are taxable, but, as part of an exemption, can’t exceed a 15% rate. Tavares argues his bonus should be taxed at 15% as he was a New York resident in 2018 and spent just 45 days in Canada that year.
Aside from this exemption, signing bonuses in Canada are treated as salary. The CRA clearly disagreed that Tavares was a U.S. resident after signing with the Leafs.
Former Blue Jays players Jose Bautista, Russell Martin, and Josh Donaldson have faced similar challenges from the CRA over their, let’s call them creative, tax filings.
Why it matters: With higher taxes, smaller markets, and less-than-ideal weather, Canadian franchises already have a hard enough time luring top talent from the U.S. If Tavares is unsuccessful in his bout with the CRA, it could further deter athletes from coming north of the border, even if they’re promised tax exemptions.
Our take: The Jays have somewhat bucked this trend — Vladimir Guerrero Jr., Dylan Cease, George Springer, to name a few exceptions — but Rogers has shown that you have to overpay (often by a lot) to attract or retain talent in Canada.—LA
