While the future of John Tavares with the Toronto Maple Leafs remains uncertain — with questions still swirling about whether he’ll re-sign or move on — one issue has now been resolved in his favour: a high-stakes tax dispute with the Canada Revenue Agency (CRA). The case centred on the $15.25 million signing bonus he received in 2018, which the CRA argued should be taxed as regular income rather than a signing bonus. Tavares, a U.S. resident then, maintained that the bonus qualified for preferential tax treatment under Canadian law.
In a recent ruling, a judge sided with Tavares and dismissed the CRA’s case after the agency refused to disclose key documents to justify its tax reassessment. The decision marks a significant legal win not just for Tavares but potentially for all Canadian NHL franchises that use signing bonuses to attract top-tier talent. Unless the ruling is appealed, it could reshape how such bonuses are treated in future tax audits — and offer Canadian teams a more straightforward path to competing financially with their American counterparts.
What Was the Tavares and Canada Revenue Agency Dispute About?
To review, the heart of the case was Tavares’ staggering $15.25 million signing bonus paid out when he joined the Maple Leafs in 2018. When signing, Tavares was a U.S. resident and had just completed his final season with the New York Islanders. His advisors claimed the payment qualified as a signing bonus and should be taxed accordingly. Under Canadian tax law, signing bonuses are taxed more favourably than regular salary income. [For Maple Leafs fans who remember former general manager Kyle Dubas’ negotiations, signing bonuses were frequently used to sign high-salaried players to contracts.]
In Tavares’ case, the CRA, however, took a different view. They argued that the bonus functioned more like a salary and should be taxed. Their justification? Tavares could forfeit part of the bonus under certain conditions, such as breaching his contract or retiring. They also cited a confidential audit comparing his situation to 10 other unnamed NHL and NBA players — data that Tavares’ legal team argued was being used selectively and without transparency.
Why the CRA Lost the Case
When pressed in court to produce records backing their reassessment — including audit team communications and comparable player data — the CRA refused, claiming confidentiality and irrelevance. That’s where the judge drew the line. In a significant ruling, Judge Yuan determined that many of the CRA’s objections were unjustified. While he acknowledged privacy concerns, he found the agency’s refusal to disclose key audit information hampered Tavares’s right to a fair appeal.
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Because the CRA would not comply with the court’s direction to disclose relevant material, the case was effectively dismissed — a significant setback for the agency and a clear win for the Tavares camp.
Why This Matters for the Maple Leafs — and Beyond
This ruling could set a precedent for other cases involving signing bonuses. Former Maple Leafs Patrick Marleau and Jake Muzzin have faced similar CRA scrutiny, as have former Toronto Blue Jays players Josh Donaldson and Russell Martin. In December 2024, Donaldson and Martin won their respective cases, though the CRA has since appealed.
(THE CANADIAN PRESS/Frank Gunn)
The practical issue is this: Canadian teams often use signing bonuses to attract or retain top-tier players, particularly those from the United States, where taxes are structured differently. If Canadian tax authorities treat those bonuses as salary, it becomes much harder for teams like the Maple Leafs to compete with their U.S.-based counterparts on total compensation.
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Tavares’ agent, Pat Brisson, said earlier this year: “John paid U.S. tax on the bonus as a New York resident. Canada wants to treat it as if it were theirs. It’s merely a question of who gets the tax.” (Without going into too much depth, Brisson’s remark is more than a bit of an oversimplification — the dispute involved not just which country had taxing rights, but also how the bonus was classified, which would have significantly affected the total amount of tax Tavares owed. The way Brisson frames it implies the tax bill would have been the same either way. It would not have been.)
The Court Case Is a Clear Win for Tavares — For Now
With the judge’s ruling, it appears that Tavares will not be required to pay additional Canadian taxes on his signing bonus. More importantly, the CRA may need to rethink how it approaches similar audits going forward.
That’s good news for the Maple Leafs and other Canadian franchises. It allows them to continue using signing bonuses as a legitimate negotiating tool, offering financial clarity to potential free agents—a major factor in leveling the playing field with American teams.
