With all the talk of financial disadvantages that surround playing for a sports team in Canada, Tanev's unique situation helped the Maple Leafs land the veteran defenseman.
With all the talk of financial disadvantages that surround playing for a sports team in Canada, Tanev's unique situation helped the Maple Leafs land the veteran defenseman.
It's no secret that Canadian NHL teams are certainly up against it when it comes to being an attractive market for free agents. Among the highest taxed of all the pro sports markets, there has been growing chatter about the disadvantages that exist for all seven Canadian franchises trying to land free agents.
But recently, the Maple Leafs found themselves in a unique situation where landing their most sought-after free agent became a little easier given the Toronto native's circumstances.
The Maple Leafs signed 34-year-old Chris Tanev to a six-year contract worth $27 million this summer. Many factors led to the veteran choosing to go to his hometown team rather than stay with the Dallas Stars, who fell to the Edmonton Oilers in the 2024 Western Conference Final.
Although Texas is one of several states that don't collect income taxes, Tanev was mindful to avoid a certain tax he could have been subject to had he elected to stay in the United States.
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"You do have the lower state tax there but I’ve played in Canada for 14 years. I’m from here and my wife’s family is from close to here. There’s also a tax when you leave Canada to become a US citizen there’s a departure tax to leave Canada," Tanev explained when he met with the media to discuss his deal last month,
Tanev has played 792 NHL games over 14 seasons. All of them have been with Canadian teams except for 19 games when Tanev was traded from the Calgary Flames to the Stars before the trade deadline. Because Tanev's stay in the United States was brief. Tanev wasn't subjected to any tax penalties as a non-resident, but a longer-term deal with an American team could have exposed the player to a departure tax, leaving them to capital gains taxes on certain assets in Canada, for what the CRA refers to as deemed dispositions.
For younger players drafted with an American team or starting their careers in the United States, the wealth accumulation may not be that much at say 18 or 20 years of age compared to 34 and those taxes for someone like Tanev can be quite costly.
Still, with all of the loopholes out there, it's possible the Stars could have made it worth his while to make the move. But the Leafs also forked over $21 million of his total compensation in signing bonuses, including a $5 million bonus for this year at signing. A common tactic used by the Maple Leafs is locking up players who don't make elite-level salaries, the $5 million can accrue interest and wealth from the very beginning, making it more lucrative than a salary that wouldn't normally start being paid out until Oct. 15.
But it's not solely about the money for Tanev, although it certainly doesn't hurt.
"That plays a role into it and family reasons and obviously coming to a good team is a big part of that," Tanev explained "I didn’t want to leave Dallas and go to a team that wasn’t trying to win. That’s a huge reason why this happened."
That signing bonus, also makes Tanev's deal virtually impossible to buy out if things go south in the final years of his deal. That certainly presents a certain level of security.
Can Canadian teams use this to their advantage on a regular basis?
The short answer is no. Tanev's case is extremely unique with no American ties for either him or his wife. With a 21 percent chance of being drafted by a Canadian team, being from Canada and having no ties to the United States or elsewhere, Tanev's situation is extremely rare.
But it's not often that the Leafs are going to find themselves with a veteran player who has spent their entire career in Canada and is originally from Toronto where this particular advantage makes sense. While other loopholes for players in Canada like the retirement compensation arrangement (RCA) plan and the tax breaks associated with signing bonuses have come under scrutiny by the CRA in recent months, this was an ideal situation for the Leafs to get the player they wanted.
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