RCAs for Professional Athletes: Funding, Tax and Cross-Border Planning
Updated: Oct 4
Reviewed October 4, 2026.
A Retirement Compensation Arrangement can help fund benefits after an athlete retires or substantially changes the services they provide. Whether it is suitable depends on the employment contract, reasonable funding, residence and the tax treatment in each country.
The tax cost during accumulation
Under the ordinary funded RCA regime, a $100,000 gross employer contribution generally leaves $50,000 to invest and $50,000 remitted as refundable tax. Investment income and gains are generally also subject to 50% refundable tax. An RCA is therefore not an account in which the full contribution and all investment growth compound free of annual tax.
Distributions have their own income-tax and withholding treatment. Recovering refundable tax is part of the funding mechanism; it does not make the benefits tax-free.
Funding is not determined by contract value alone
A high salary can support supplemental pension planning, but it does not create unlimited contribution room. The promised benefit, employment services, actuarial support and deduction conditions matter. Review these before changing a compensation agreement.
Martin and Donaldson: A specific Canadian-source income issue
In Martin v. The King, 2024 TCC 153, the Tax Court considered the allocation of employment compensation and employer RCA contributions for non-resident Blue Jays players. On August 28, 2026, the Federal Court of Appeal dismissed the Crown's appeals in Canada v. Martin, 2026 FCA 144.
The appellate reasons support first determining the compensation attributable to duties performed in Canada, then deciding which components are included or excluded from income. The contracts and the allocation of the RCA contributions mattered. The decision does not establish that any athlete can deduct any RCA contribution entirely against Canadian income.
Before relying on a cross-border benefit
Review Canadian and foreign residence, days of service, the compensation agreement, contribution reasonableness, treaty provisions, withholding and foreign tax credits. A Canadian withholding rate alone does not show the total tax payable abroad.
Model the investment account, refundable-tax balance, expected payout dates and taxes in both countries. Compare the RCA with other compensation and retirement options using the same cash cost.
Sources and case text
Discuss your situation with Xponents
Contact Xponents to discuss the issue and the scope of a tax-planning review. Advice and implementation depend on your facts and the agreed engagement.
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