In August, a Toronto Maple Leafs forward spent a day on a witness stand describing meetings he'd had eight years earlier.

Nobody accused him of hiding anything. The payment was reported. Tax was withheld on it and sent to the Canada Revenue Agency. The argument is about which rate should have applied and it has quietly become one of the more useful tax cases in the country for any business with people on both sides of the border.

What happened

In 2018, John Tavares signed a seven-year deal with the Toronto Maple Leafs. Most of the money, around 92% of the contract's value, came as signing bonuses rather than salary.

He was still living in the United States when the first bonus was paid. A rule in the Canada–US tax treaty caps what Canada can charge on money paid to persuade an athlete to sign: 15%. So 15% was withheld and sent to the CRA, and he reported the income in the US, claiming credit there for the Canadian tax.

If you've read that he “paid 15% in the United States,” that's wrong and the error appears in a lot of the coverage. The treaty limits what Canada can take. The money went to the CRA as the Globe and Mail's tax column noted when the case was filed, the CRA's bill was calculated after crediting the 15% already paid to it.

In 2022, the CRA disagreed with the whole approach. It decided the treaty rule didn't apply, and that the bonus was ordinary employment income taxable at regular Canadian rates, north of 50%. With interest, roughly $8 million is now in dispute.

The trial began in August 2026 and is expected to run about two weeks. A nearly identical case involving Patrick Marleau is being heard at the same time. No decision has come down yet.

Why the outcome is genuinely open

Two things make this more than a celebrity story.

The default is harsh. Canadian tax law treats a signing bonus paid to a non-resident as employment income earned in Canada, fully taxable. The treaty rule is the exception. If the exception doesn't apply, the harsh default does.

The closest precedent cuts against labels. In a 2000 Tax Court case involving another NHL player, the judge found every part of the contract was really payment for playing hockey regardless of the fact that the contract split it into “signing bonus” and “salary.” No case has yet applied that reasoning to this particular treaty rule, which is exactly why this one is worth watching.

The two sides, fairly stated:

The CRA points at the contract itself. If Tavares had breached it, retired, refused to report, or left the team, he would have kept only part of the bonus. A payment you can forfeit by not showing up, on that reading, is pay for working, not a payment to get you to sign.

Tavares argues the bonus was payable whether or not he actually played, including if he had been injured, which makes it different from salary, which could be reduced based on performance.

Worth noting what isn't in dispute: his lawyer told the court that nobody is alleging the “signing bonus” label was a sham or invented after the fact. Both sides accept the contracts say what they say. The fight is about how tax law should read them.

Strip out the hockey and you're left with something that applies to a two-person consultancy as much as a hockey club:

What you call a payment doesn't decide how it's taxed. What decides it is where the work was done, and what the payment was really for.

Where this shows up in an ordinary business

You're not signing nine-figure contracts. But if you have people, money, or owners crossing the Canada–US border, you're making the same kind of decision, usually without noticing.

1. You hire someone in the other country

You're in Toronto and you hire a salesperson in Texas. You're in Chicago and you take on a designer in Vancouver. That person's location isn't just an HR detail. It can create payroll registration, withholding and filing obligations in a place where you have no office and have never set foot.

The short version: every hire in a new country or state is a compliance event, not just a headcount decision.

2. Someone relocates partway through the year

An employee moves from Toronto to New York in August. They may now owe tax in both countries for the same year, with a treaty deciding how the income splits between them.

Payroll software doesn't work this out on its own and your payroll provider isn't responsible for it either.

3. Shares or options that vest across a move

This is the one most people get wrong.

If you've given someone shares or share options and they move countries before those vest, the common assumption is that wherever they live when they cash out is who taxes it. Usually it isn't. That income is generally split according to where the person actually worked between the grant and the vesting ,not where they happened to be living at the end.

So someone granted shares while working in Canada, who then moves to the US and vests there, can face claims from both countries on portions of the same income. Credits exist to prevent genuine double taxation, but they only work if someone does the split properly and both payroll systems report it the same way.

Same question as the case: not where you were standing when the money arrived — where you earned it.

4. An owner leaves Canada still holding shares in the business

This one catches owners of every kind of business, and it's the most expensive surprise on the list.

If you stop being a Canadian tax resident, the CRA generally treats you as having sold everything you own at market value on the day you leave — and taxes the gain. Nothing is actually sold. No cash changes hands. The tax bill is real anyway.

For someone who spent twenty years building a business and is now retiring to Arizona, that is not a small number.

Two details worth knowing:

• Some property is excluded, Canadian real estate, registered savings like RRSPs and TFSAs, and certain employee share options.

• You can often defer the payment by making an election, and by posting security with the CRA above a certain threshold. But that's a filing you make on the way out, not a discovery you make later.

Before you conclude the sky is falling

Some perspective. Tavares's contract routed roughly 92% of its value through signing bonuses, deliberately structured by specialists. Most businesses are nowhere near that territory.

The lesson isn't don't structure pay. It's that the structure has to match what's actually happening and if it does, you need to be able to show it.

Two things this case makes concrete

Intent is evidence, and evidence fades. The trial required reconstructing 2018 negotiations in detail, eight years later. When a tax position depends on why something was done, the record made at the time is the position. Written afterwards, it's just recollection.

Time is the quiet cost. The bonus was paid in 2018. The CRA reassessed in 2022. The trial started in 2026, and a decision may take longer still. Interest on overdue tax runs at 7%, compounded daily. A question you put off doesn't stay the same size.

What to actually do

You don't need to become a treaty expert. You need to notice when you're in this territory:

• Before your next cross-border hire or offer, ask where the work will be done, not just where the person banks.

• When someone relocates, tell whoever does your tax work the same week you tell payroll — not at year-end.

• If anyone holds shares or options through a move, keep a record of where they worked and when. Tedious now; it's the entire basis for the split later.

• If an owner or major shareholder is thinking about leaving Canada, get advice before the move, while the elections are still available.

None of that requires a specialist on retainer. It requires knowing which questions change the answer.

This article is general information, not tax or legal advice. The Tavares appeal was undecided at the time of writing, and cross-border tax outcomes depend heavily on specific facts, residency, and how a treaty applies. Talk to a qualified advisor about your own situation.

Working out how to pay a cross-border team or wondering what your last relocation triggered? Get in touch.

Sources

• Canada–United States Convention with Respect to Taxes on Income and on Capital, Article XVI(4) — Department of Finance Canada

• Income Tax Act, paragraph 115(2)(c.1) (signing bonuses paid to non-residents) and section 128.1 (deemed disposition on emigration)

• Khabibulin v. The Queen, 2000 DTC 1426 (Tax Court of Canada)

• Tavares v. The King, 2024-212(IT)G — Tax Court of Canada

• Canada Revenue Agency, “Dispositions of property for emigrants of Canada”

• The Globe and Mail, “The tax complications that have ensnarled Leafs’ John Tavares after his $15-million signing bonus from 2018” (personal finance / taxes), August 2024

• The Globe and Mail, “Maple Leafs captain John Tavares in $8-million tax dispute with CRA,” February 2024

• Rotfleisch & Samulovitch P.C., summary of the Notice of Appeal, March 2024

• CP24, The Hockey News and National Post trial coverage, August 2026