[sureLoss]

Athletic outlines how agents/accountants help players get around the high taxes in Canada

https://theathletic.com/411211/2018/...canadian-team/

“I can make it so signing in Montreal is the same as signing in Texas,” an agent told The Athletic.

Really? Residents of Texas pay federal tax at a lower rate than Canadians and pay no state tax on their home games. That’s tough to beat, no?

“In my opinion, the tax rate can be as low, or if not very close to what it is in Texas, Las Vegas, Florida or Tennessee,” confirms Jason Chevrier, an accountant and tax advisor with an expertise in cross-border taxes. “It’s a myth that Canadian players – I say that because taxes in Ontario are higher than they are in Quebec at that tax bracket – it’s a myth to say Montreal is the worst place to play hockey. Montreal can even be one of the best places if it’s planned properly.”

There are different strategies available to players to mitigate the 53 percent tax burden in Quebec, but the most effective of those strategies is called a Retirement compensation arrangement, or an RCA.

Basically, an RCA is a mechanism to defer paying income taxes for high earners who will suffer a significant drop in revenue as soon as they retire. This is something that is available to everyone, but professional athletes are eligible for exemptions that most people don’t have available to them. Not only that, but not everyone has the same financial flexibility to contribute to an RCA as professional athletes. They are in a special category of taxpayers. In terms of hockey players, it is mainly those who will go live in a place where the tax laws are more beneficial once they retire who use an RCA. Many European players and some American residents take advantage of it, but there are still some Canadians who are already planning to retire out of the country.

The way the RCA works is a player will generally place 40 to 50 percent of his salary in a trust and that amount would be sheltered from the high tax rates in Ontario or Quebec, for example. When you put money into an RCA you don’t have access to it until you are no longer employed by the team, but it is intended for when the player has stopped playing professional hockey. Once he retires and is no longer a Canadian resident, he can withdraw that money and pay a one-time tax on it at a rate of 25 percent. In some cases, the tax rate would be even lower if the withdrawal is stretched over a longer period. Not only is it a favourable arrangement, but part of that money in the trust will have grown with interest over a few years.

The RCA can single-handedly make a huge difference and essentially eliminate the tax handicap that plagues Canadian teams.