[News] John Tavares

[RM14]

Originally Posted by kipperiggy

Canadian tax system is based on residency.

I do not know the intricacies of the tax treaty between the two countries but on a surface level if Tavares is a Canadian citizen not residing in Canada more than ~180 days then he would be taxed on that income in the US, so taxing him again on the same earnings in Canada would be double taxation of the same income, which is the whole point of the treaty.

Point being, if he loses and has to pay CRA then what happens to the taxes he already paid the IRS?

Oh Locke where art thou? I am but a measly auditor who took tax 10+ years ago...

Google "Forign Tax Credits" and then "competent authority?

[RM14]

Originally Posted by kipperiggy

Canadian tax system is based on residency.

I do not know the intricacies of the tax treaty between the two countries but on a surface level if Tavares is a Canadian citizen not residing in Canada more than ~180 days then he would be taxed on that income in the US, so taxing him again on the same earnings in Canada would be double taxation of the same income, which is the whole point of the treaty.

Point being, if he loses and has to pay CRA then what happens to the taxes he already paid the IRS?

Oh Locke where art thou? I am but a measly auditor who took tax 10+ years ago...

Google "Forign Tax Credits" and then "competent authority"

[Locke]

Originally Posted by kipperiggy

Canadian tax system is based on residency.

I do not know the intricacies of the tax treaty between the two countries but on a surface level if Tavares is a Canadian citizen not residing in Canada more than ~180 days then he would be taxed on that income in the US, so taxing him again on the same earnings in Canada would be double taxation of the same income, which is the whole point of the treaty.

Point being, if he loses and has to pay CRA then what happens to the taxes he already paid the IRS?

Oh Locke where art thou? I am but a measly auditor who took tax 10+ years ago...

Oh dude...do you really want to know?

I kind of stayed out of it because there are so many moving pieces involved here and I have little to no concrete information.

Generally speaking, yes, in America you have to pay tax in every jurisdiction in which you earn income.

Yes, he paid 15% on his signing bonus and, I believe you're allowed to do that...in America.

In Canada however those regulations were changed where your employer had to withhold significantly more, but that applied to normal bonuses, etc. I cant speak to NHL signing bonuses but assume they operate similarly.

The thing is...he was likely a Canadian Resident when the Bonus was paid and ergo is subject to Canadian Taxation regulations despite being paid by an American company.

Like it or not.

[taxbuster]

Originally Posted by kipperiggy

Canadian tax system is based on residency.

I do not know the intricacies of the tax treaty between the two countries but on a surface level if Tavares is a Canadian citizen not residing in Canada more than ~180 days then he would be taxed on that income in the US, so taxing him again on the same earnings in Canada would be double taxation of the same income, which is the whole point of the treaty.

Point being, if he loses and has to pay CRA then what happens to the taxes he already paid the IRS?

Oh Locke where art thou? I am but a measly auditor who took tax 10+ years ago...

The Canadian tax system IS based on residence. The US system is based on citizenship. These can collide. For resolution, one usually turns to the Convention Between Canada and the United States of America. Regardless of the Treaty however, a taxpayer in one state (country) is entitled to a credit for taxes paid to a foreign state (country). This is intended to avoid double taxation - which, per my other note - does occur in weird situations from time to time, and results in a referral to "Competent Authority" for resolution.



In this particular instance, it would appear that CRA is trying to grab the lions' share of the tax funds, at a period earlier than may otherwise be optimal for the taxpayer. This would not, however, prevent him from applying tax paid to Canada against his (otherwise considerable?) tax owing to the US.


With respect to sorting it out once a decision has been rendered, each country will collect, or refund, any tax owing or excess collected, as needed. The fact that he's paid it to one or another just means more paper shuffling to each country's tax authority.


I'm doing exactly this for a YouTuber client who paid tax to the US (collected by Google at source, and should not have been) but has also been assessed by CRA for the same income. Messy, but it sorts itself out with patience and time, and various "amended tax return" filings.