The tax agency\u0027s battle with the superstars like Jose Bautista could have a chilling effect on Canadian teams’ ability to attract top talent
Specifically, the tax agency is challenging how much income the players can deduct from their taxes through contributions to a form of pension plan through an employer called a Retirement Compensation Agreement . None of the allegations have yet been tested in court.
According to cross-border tax lawyer Mark Feigenbaum, who has extensive experience setting up RCAs, “they are used mostly for executives and others, like athletes, who are temporarily in Canada.” Bautista appealed the CRA’s reassessment of his tax declarations in court in August 2022. In his appeal, he says his RCA “exhibits all of the hallmarks of a pension plan and should be treated as such,” thus making his contributions legally deductible.
The documents also do not indicate how much money CRA is trying to claw back in taxes, although income over $221,708 was taxed at 53.53 per cent in Ontario in 2022. Bautista earned $7.4 million in “Canadian employment income” in his last season in Toronto, according to his appeal. “It would be less enticing for any kind of talent to work in Canada if they’re not permitted to provide for retirement from the portion of their time working here,” said Feigenbaum. “The Court has confirmed in the past that these are legitimate tax planning retirement plans that are already permitted under the legislation.”
Martin and Donaldson are also battling the CRA over deductions related to their RCA contributions. The key difference in their cases is that the tax agency agrees with the two players that their RCAs, set up at around the same time as Bautista’s, meet the legal definition in the Income Tax Act.Article content
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