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The Canada Revenue Agency ("CRA") has implemented significant changes to its Voluntary Disclosures Program ("VDP"), with new rules in effect for applications received on or after October 1, 2025. The changes are intended to improve transparency, simplify the application process and expand access to relief for taxpayers who voluntarily correct past non-compliance.
The VDP allows taxpayers to proactively correct errors or omissions in previous tax filings in exchange for relief from penalties, partial interest relief and protection from criminal prosecution. This includes non-compliance issues such as unreported income, incorrect deductions or unfiled tax returns.
Key Changes to the VDP
1. New Application & Relief Categories
The revamped VDP provides two tiers of relief – general and partial – based on whether the application qualifies as "unprompted" or is considered "prompted".
General Relief for Unprompted Applications
An application is generally considered unprompted when there has been no communication between the CRA and the taxpayer about an identified compliance issue related to the disclosure or where an application is made following an education letter or notice offering general guidance and filing information. Taxpayers who submit an unprompted application are eligible for 100% penalty relief and 75% interest relief for the 10 most recent taxation years (including for the three most recent taxation years). The interest relief under this category has been enhanced as previous guidelines did not provide interest relief for the three most recent taxation years and was limited to interest relief of 50% for years preceding the three most recent taxation years.
Partial Relief for Prompted Applications
The new guidelines permit "prompted applications" – a marked shift from the previous regime, which disallowed such applications because they were considered non-voluntary. The new guidelines permit an application to be made after a verbal or written communication from the CRA about an identified non-compliance issue or after the CRA has already received information from a third-party regarding non-compliance. Prompted applications are eligible for up to 100% penalty relief but will receive only 25% interest relief for the 10 most recent taxation years.
Under tax legislation, the CRA can only grant penalty and interest relief for the most recent 10 taxation years.
2. Expanded Eligibility Criteria
Under the revised rules, a taxpayer may remain eligible for the VDP even after receiving a communication from the CRA, such as an "education letter." Previously, many communications from the CRA regarding a potential non-compliance issue disqualified a taxpayer from being eligible to qualify for the VDP. However, depending on the nature of the communication, taxpayers may now be eligible to make a prompted application to obtain partial relief from the applicable penalties and interest.
In addition, the revised rules permit taxpayers to qualify for the VDP where errors or omissions to penalties or interest applying. This is a notable change from the prior framework which required the actual or potential application of a penalty. The revised rules also broaden access for repeat applicants, where the CRA may consider a subsequent application by the same taxpayer if the circumstances were beyond the taxpayer's control or the application concerns a different matter than a prior application.
3. Application and Supporting Document Requirements
The new guidelines require taxpayers making a voluntary disclosure to submit Form RC199, Voluntary Disclosures Program (VDP) Application. Applications must include supporting documentation looking back six years for domestic income or asset-related disclosures, 10 years for foreign income or offshore asset disclosures and four years for GST/HST-related disclosures. Only years with errors or omissions need to be disclosed.
Additionally, all supporting documentation must be included with the form at the time the application is submitted. Under the previous rules, applications could also be made by way of a letter, and taxpayers were able in some circumstances to submit their supporting documentation at a later date.
The more stringent application requirements included in the revised guidelines may delay a taxpayer's ability to submit a VDP application as they take the appropriate time and care in preparing or compiling the supporting documentation. This increases the risk that the CRA may identify the error or omission and begin an audit or investigation before the taxpayer is able make a voluntary disclosure. A taxpayer who is under audit or investigation is ineligible to apply for relief under the VDP.
4. Broader Scope of Tax Programs
The revised VDP explicitly includes not only income tax and GST/HST, but also other regimes such as the luxury tax, underused housing tax, digital services tax (DST) and fuel charge.
VDP Before and After October 1, 2025
|
Date of Application |
Before October 1, 2025 |
On or After October 1, 2025 |
|
Relief Tiers |
General Relief and Limited Relief |
General Relief (Unprompted) and Partial Relief (Prompted) |
|
Penalty Relief |
General: Up to 100% Limited: None |
General: 100% Partial: Up to 100% |
|
Interest Relief |
General: None for three prior taxation years; 50% for taxation years four to ten Limited: None |
General: 75% for 10 most recent taxation years Partial: 25% for 10 most recent taxation years |
|
Effect of CRA Contact |
Most contact disqualified eligibility |
Contact not determinative (e.g., communication that identifies a specific error or omission and requests to file may be eligible under the Partial Relief (Prompted) stream) |
|
Taxes Covered |
Income tax and GST/HST |
Expanded to include luxury tax, underused housing tax, DST and fuel charge |
Taxpayers considering a voluntary disclosure should assess whether they qualify under the new rules and should act promptly to ensure full eligibility. Applications that were submitted before October 1, 2025, will be reviewed under the prior VDP policy.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
