The former General Manager (GM) of the Maple Leafs, a Canadian ice hockey team, won a battle against the Canada Revenue Agency (CRA) regarding his tax obligations. Dave Nonis, was fired from the ice hockey team as GM and since then has considered himself a U.S citizen for tax purposes, and paid Canada’s income tax based on the amount of time he spent in Canada each year.
The CRA said that his salary continuance since being let go should be considered in the same manner as a signing bonus. However, this rule doesn’t apply to the employment income of an American athlete who competes in Canada. The Canada-US treaty applies a 183-day test and “the non-resident athlete pays Canadian tax on his or her employment income only if his or her presence in Canada exceeds 183 days in that year.”
Canada taxes non-employee athletes and non-resident athletes differently. A non-resident athlete should always seek professional guidance from an expert tax lawyer in Canada to ensure they fulfil their tax obligations.
According to the CRA, all non-residents terminated with salary continuation would be taxed on that income despite leaving Canada, and the cessation of services performed in Canada – which was deemed absurd. The Canada Tax Court sided with Mr. Nonis because he had been living almost exclusively in the US since he was let go by the Maple Leafs.