The approach taken by Mr. Tavares was simply taking advantage of planning allowed by the Canada-U.S. tax treaty. He could have structured his compensation in a more tax-aggressive manner. But he didn’t
Toronto Maple Leaf John Tavares faces the media prior to the game against the New York Islanders at NYCB Live's Nassau Coliseum on Feb. 28, 2019 in Uniondale, New York.Last week, I shared details about the battle that Toronto Maple Leaf John Tavares is having with the Canada Revenue Agency. His story is important because it has greater implications for Canadians in general than most realize. of US$15.25-million in 2018 when he signed a contract to play for the Maple Leafs.
. His total compensation over his seven-year contract is US$77-million, with US$70.89-million being an inducement , and just US$15.25-million of that amount is eligible for the 15 per cent treaty tax rate. You see, the portion of the inducement paid after he moved back to Canada – a total of US$55.64 million – is subject to full Canadian tax rates of about 53 per cent.
If U.S.-resident athletes understand that the CRA is intent on overriding long-standing provisions of the Canada-U.S. tax treaty to their disadvantage, then many may simply choose to play for U.S. teams instead. If Canadian teams are unable to attract U.S. athletes, just imagine the imbalance this can create in the competitiveness of any league with teams on both sides of the border.
Tax United States Cent Canada Inducement Amount United States Sport CRA CFP FCA
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