John Tavares, CRA's $8 million tax dispute heads to appeals court

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

Lawyers for Tavares, 33, filed an appeal with the Tax Court of Canada last week to try to block the CRA's reassessment of the return, which found Tavares' income that year was $17.8 million higher than he reported.

In the reassessment, the CRA ordered Tavares to pay 38 percent of the bonus, including interest, for a total of $8 million, the appeal said.

Tavares claims the difference stems from the CRA's miscalculation of taxes owed on the $15.3 million signing bonus paid to him by the Toronto Maple Leafs. On appeal, the bonus should have been taxed at only 15 percent under a Canada-US tax treaty rule that sets lower rates for “incentives” paid to athletes, artists, actors or musicians.

A bonus is distinct from salary income and should not be treated as such by the CRA, he says. The appeal alleges that the bonus was paid into an American bank account and that Tavares was only in Canada for 45 days between September and December 2018 when he played with the Maple Leafs. In turn, he believes that the 2018 portion of the bonus should be taxed at an incentive rate of 15 percent.

As of Wednesday, the claims had not been tested in court and the Canada Revenue Agency had not responded to Tavares' complaint.

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

“Integral” of the deal.

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

The bid was not his highest bid, according to the filing. It said the “brand” player has received a lot of interest from several teams, including the San Jose Sharks, Boston Bruins, Tampa Bay Lightning and Dallas Stars. In the end, Tavares chose his hometown team, with the application identifying the signing bonus as an “integral” part of the player's decision.

“The signing bonus is for Tavares, an exceptionally skilled and sought-after unrestricted free agent who signed a seven-year contract with the Toronto Maple Leafs,” it said. “He turned down high-paying offers from other teams, including a seven-year, $91 million offer from the San Jose Sharks.”

The $17.8 million bonus payment cited in the appeal represents only the first year's payment of Tavares' entire $70.9 million signing bonus over the life of his contract.

In 2019, Tavares was named captain of the Maple Leafs after scoring a career-high 47 goals and 88 points in his first season with the team.