Reports: CRA Pushing Back on John Tavares' Signing Bonus Tax Claim With Maple Leafs and Why it Matters

The Canadian Revenue Agency has responded to John Tavares' appeal on a re-assessment of his 2018 taxes saying that the $15.25 million (US) he was given as a signing bonus wasn't a signing bonus.

According to CityNews' Glen McGregor, the CRA responded to Tavares' appeal this month and “denies that any amount referred to as a ‘signing bonus’ was a signing bonus or an inducement payment,” according to the response.

In January, Tavares took the Canadian tax collection agency to court after they said he owned $8 million in a reassessment. At the heart of the dispute is his compensation for the 2018-19 season where $15.25 of his $16.9 million was paid out in a signing bonus. Under a U.S.-Canadian tax treaty, signing bonuses can be taxed at 15 percent. But the CRA is saying it's not really a signing bonus citing...“if at any time during any League Year, [Tavares] breached the Contract, voluntarily retired, withheld his services (including a refusal to report, practice, or play), or left the Toronto Maple Leafs… the Appellant would only be entitled to retain a pro rata portion of the ‘signing bonus’…”

Tavares' side argues that if the NHL were to go into a labor stoppage and the NHL didn't play, he'd be entitled to the full bonus.

The tax issue first became public in January. Tavares, speaking to reporters in February said the issue wasn't weighing on his mind and declined to comment.

Tavares stated that he was only a resident of Canada from September 2018 onward and while he paid US taxes on the gross amount, the CRA states that he has been in Canada for more than 183 days as set by the parameters of the benefit, although they don't state how.

What happens if Tavares loses his case?

There is no hearing date set yet for this case. But if this goes all the way and Tavares loses his case, this will have possible ramifications for other NHL players who sign contracts in Canada that were loaded with signing bonuses. Many of the Maple Leafs have deals that are front-loaded with an up-front payment. If you are a Canadian player deciding between a Canadian club or a US club with the same compensation, do you really want to deal with a dispute in the account of your play? It could be the difference between signing and not.

Tavares, in his initial appeal, indicated that the signing bonus was "integral" signing with Toronto.

There are definitely semantics at play. Is an up-front bonus the same as a signing bonus? According to the CRA, it isn't. But even still, if the signing bonus is deemed to be a bonus, they are saying Tavares wasn't living outside of Canada long enough to qualify.

Either way, if you are a Canadian player deciding between a Canadian or American NHL franchise, you may start to ask yourself if this is worth it. And that's why it matters to teams like the Maple Leafs, providing another obstacle in trying to sign players.