John Tavares is fighting an $8 million Canada Revenue Agency tax bill. Ottawa asks court to order him to pay |

The federal government is fighting back John Tavares$8 million tax dispute with the Canada Revenue Agency, arguing Toronto Maple Leafs The captain is offside.

In a response to Tavares’ appeal to the Tax Court of Canada, the Attorney General of Canada (AGC) challenged Tavares’ request to reverse the Canada Revenue Agency’s reassessment of his 2018 tax return.

According to the Canada Revenue Agency Tavares appealed in January.finding that his 2018 income was $17.8 million higher than reported and ordering the player to pay $6.8 million in taxes (more than 38%) plus $1.2 million in interest.

The 33-year-old from Mississauga, Ontario, signed a seven-year, $77 million contract to join the Maple Leafs on July 1, 2018. He previously played for the New York Islanders from 2009 to 2018.

Tavares said in his appeal that the $17.8 million amount was a $15.25 million signing bonus in the first year of the contract and “was a key factor in his decision to accept the contract.”

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The court document added that Tavares' signing bonus “was an inducement to enter into an agreement related to the athlete's performance” and should not be considered wages or salary.

The Attorney General's Office disputed this in a response filed late last month.

It reads in part: “For purposes of the entire notice of appeal, the Attorney General of Canada (AGC) denies that any amount referred to as a 'signing bonus' is a signing bonus or inducement payment.”

The claim has not yet been heard in court

Tavares argued in his appeal that he was eligible for a 15% tax reduction at the time under the terms of the Canada-U.S. tax treaty, which applies a lower tax rate to payments to artists, musicians, actors and athletes.

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The report also noted that $11.4 million in prize money was deposited into Tavares' New York bank account after deducting related expenses, and said Tavares spent 45 days in Canada between September 13 and December 31, 2018.

He added in his appeal that under the Income Tax Act, “signing bonuses are includible in income only to the extent that they are reasonably considered to be attributable to services performed in Canada.”

Tavares' contract total includes a $70.89 million signing bonus and a $6.11 million base salary. Tavares appealed, arguing that bonuses are different from salary because they are paid regardless of whether he plays, is traded, demoted to the minor leagues, injured, or involved in a labor dispute.

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The Court of General Appeal disputed this argument, stating that the contract provided that Tavares could only retain the “prorated portion” of the signing bonus received prior to the contract termination date and was required to repay the portion of the “signing bonus” (if any) that had been paid to him to which he was not entitled.

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The AGC added in its response that the $15.25 million signing bonus was paid on or about July 3, 2018, by Maple Leaf Sports & Entertainment, Inc. (MLSE), a Canadian corporation organized under federal tax law. It cited the NHL collective bargaining agreement, which defines a “league year” as beginning on July 1 and running through June 30 of the following year.

“The 2018 amount is the wages, salary or other remuneration received by the appellant while he was a resident of Canada during the 2018 tax year. Therefore, the entire 2018 amount should be included in the appellant's income under subsection 5(1) of the Act,” it said.

“The amount for 2018 is also deemed to be remuneration for services rendered by the appellant under section 6(3) of the Act in the context of section 5 of the Act in respect of services rendered by the appellant during his employment with MLSE under section 6(3) of the Act. Therefore, the entire amount for 2018 is included in the income of the appellant for the purposes of section 6(3) and section 5 of the Act.”

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Tavares’ attorney had not responded to a request for comment as of press time.

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The lawsuit has not yet been heard in court, and the Tax Court has not yet scheduled a hearing.

— With files from The Canadian Press

© 2024 Global News, a division of Corus Entertainment Inc.

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