CDN24
Registered User
- Jun 17, 2009
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The outcome of this case will have massive implications not only for Tavares but for players playing in Canada who are not Canadian residents with significant signing bonus money in their contract. Austin Matthews for one.
The CRA is saying 2 significant things
1) The signing bonus is not a true signing bonus as he would not get all of it if he chose not to play
2) JT was a Canadian resident because he failed the 183 days in Canada test.
IF the CRA wins on the 2nd point, the 1st is moot because as a Canadian resident he would be taxed in Canada on world wide income including that bonus and really the salary he earned with the islanders in 1st half of 2018.
The 1st point has massive implications, if the courts rule that that bonus is not a signing bonus in the tax authorities eyes but part of his salry, then guys like Matthews are affected. Matthews contract except for the league minimum paid as salary is paid as signing bonus. If it is a signing bonus he is only taxed in Canada on the base salary of 775K and the 15M+ of bonus is taxed only at 15% in Canada and is taxed in arizona at a lower tax rate. he gets a credit there for the 15% pd here. I suspect if CRA wins on that point they will be reassessing a lot of players.
Looking at some other americans who recently signed big contracts here there seems to be less use of the bonus structure, i wonder if teams/players are getting worried about the issue. Hellyebuyck only has a signing bonus in yr 1, Caulfield only in Year 1 and 2. Easier to argue those are truly signing bonuses. When year after year only the league min is paid as salary and the rest is signing bonus it tends to fail the smell test.
I used to work with a tax practioner who had a expression for aggressive tax planning. " pigs get fat, Hogs get slaughtered" some of these all bonus contracts are getting well into hog territory.
