Toronto Maple Leafs captain John Tavares is in an $8 million tax dispute with the CRA

Toronto Maple Leafs captain John Tavares is suing the Canada Revenue Agency over an $8 million tax dispute.

Court documents show Tavares filed an appeal with the Tax Court of Canada last week through his lawyers, seeking a reassessment of his 2018 tax return.

The CRA, according to the appeal, found that Tavares' 2018 income was $17.8 million higher than reported and ordered the player to pay $6.8 million in taxes — more than 38 percent — plus $1.2 million in interest.

Tavares, a 33-year-old native of Mississauga, signed a seven-year, $77 million contract with the hometown Maple Leafs on July 1, 2018. He previously played for the New York Islanders from 2009 to 2018.

The $17.8 million figure includes a $15.25 million signing bonus in the first year of the contract, which “was an integral part of Tavares' decision to accept the deal,” according to the appeal. It adds that the player turned down high offers from other teams, including a seven-year, $91 million contract with the San Jose Sharks.

Tavares also considered playing for the Islanders, Boston Bruins, Dallas Stars and Tampa Bay Lightning before signing with Toronto, the report said.

The court document states that Tavares' signing bonus was “an inducement to sign an athlete performance agreement” and should not be considered a salary or wages.

“The signing bonus committed Tavares — an exceptionally skilled and in-demand unrestricted free agent — to a seven-year contract with the Toronto Maple Leafs,” it said.

In the appeal, Tavares argues that he is entitled to a reduced rate of 15 percent under a provision of the Canada-US Tax Treaty that sets lower rates for incentives paid to artists, musicians, actors and athletes.

The appeal also alleges an $11.4 million bonus after the transfers were deposited into Tavares' New York City bank account and that Tavares spent 45 days in Canada between September 13 and December 31, 2018.

The appeal states that under the Income Tax Act, “signing bonuses are included in income only to the extent that they can be deemed attributable to services performed in Canada.”

In total, Tavares' deal includes $70.89 million in bonus money and $6.11 million in base salary. The appeal says bonus money is different from salary because it is paid regardless of whether a player is played, traded, sent to the minors or injured or has a labor dispute.

The claim has not been verified in court.

This report by The Canadian Press was first published on February 7, 2024.