Voluntary Disclosures Program (VDP)
What is the VDP
The VDP grants relief on a case-by-case basis to taxpayers and registrants who come forward to fix errors or omissions in their tax filings.
It is important that the relief given under the VDP be fair. It is not meant to reward taxpayers or registrants looking for a way to avoid paying their fair share of taxes.
Once CRA receive your application, CRA reviews it to ensure it meets the conditions to qualify for relief. If it does qualify, you may be eligible for general or partial relief depending on your type of application:
- •Unprompted application
- •Prompted application
- •Wash transactions (for the GST/HST only)
Eligibility conditions checklist
You must meet all five conditions below to be eligible for relief.
- •You must submit your application before an audit or investigation has been initiated against you or a related taxpayer about the information being disclosed.
- •You must include all relevant information and documentation for the required tax years or reporting periods.
- •Your information includes an error or omission with applicable interest charges and/or penalties.
- •Your information is at least one year or one reporting period past the filing due date.
- •You must include payment of the estimated tax owing or request a payment arrangement (subject to CRA approval).
When you apply, the CRA will base its decision on the information provided.
What relief may be given
If your application qualifies under the VDP, you will receive relief from penalties and part of the interest, as well as relief from criminal prosecution.
You will still have to pay the taxes you owe, plus partial interest, that result from your corrections.
On October 1, 2025, changes to the Voluntary Disclosures Program (VDP) came into effect. These changes make it easier for taxpayers and registrants to correct unintentional filing errors or omissions and make the program more accessible.
Increased eligibility
The VDP is now less restrictive than it used to be. Taxpayers and registrants who are prompted by communications about a potential non-compliance issue (for example, an education letter about unreported income or claimed ineligible expenses) would now be eligible for the program.
However, the CRA will continue to restrict VDP eligibility for taxpayers and registrants who are under audit or investigation and those who were egregiously non-compliant.
Updated relief
The VDP is now offering two new relief tiers: general and partial relief. If a VDP application is eligible for relief under the updated policy, the CRA will evaluate which type of relief it may grant depending on the type of application.
- •General relief normally applies to unprompted applications. These applications will receive 75% relief of the applicable interest and 100% relief of the applicable penalties.
- •Partial relief normally applies to prompted applications. These applications will receive 25% relief of the applicable interest and up to 100% relief of the applicable penalties.
Examples of VDP eligible situations
These are examples of situations that may be eligible for the VDP:
- •You failed to fulfil your tax obligations under the relevant legislation
- •You did not file a tax return for a previous year and it is now one year late
- •You did not report, or under-reported, your income
- •You claimed ineligible expenses
- •You did not remit employee source deductions (for example, Canada Pension Plan or employment insurance deductions)
- •You did not file certain information returns (for example, Form T1135, Foreign Income Verification Statement)
- •You did not report foreign-sourced income that is taxable in Canada
- •You have undisclosed tax liabilities
- •You failed to charge, collect, or report GST/HST
- •You claimed ineligible GST/HST tax credits, refunds or rebates
- •You provided incomplete information on a return
Documents to include
We clarified what documents taxpayers and registrants must include in their VDP application. As usual, the taxpayers and registrants must include the appropriate supporting documents (for example, returns, forms, statements, and schedules) needed to correct the non-compliance.
For situations involving non-compliance over multiple years, the taxpayers and registrants should include documents for the following number of years:
- •For foreign-sourced income or assets, the most recent ten years
- •For Canadian-sourced income or assets, the most recent six years
- •For information about GST/HST, the most recent four years
However, any tax years or reporting periods within the above timeframes that have no errors or omissions do not need to be included with the application. The CRA may ask for more documents for tax years or reporting periods beyond the above timeframes.
How would CRA even find out?
Unfiled Tax Returns/Non-Compliant: It's pretty common if you do not file your income taxes before the due date and you are not in compliance with the Income Tax Act, there are very high chances that you will receive a notice from CRA to file your tax returns and if you ignore it, then you will mostly likely have to face an Auditor and will have to pay unnecessary penalties and interest. You would end up losing the privilege and benefits of Voluntary Disclosure Program if you received that first notice.
Information slips: Every business is required to issue information slips such as T4, T4A and T5018 for payments to employees, self employed individuals or subcontractors they hire to work for them so they can claim them on their business taxes. Every information slip is inserted with the name and designated number of the person who it relates to. When CRA starts matching program during summers, they can easily track how much was paid to you in the year.
Random Audits: It is possible you could be selected for a random audit based on CRA policies and procedures. Let's say CRA is reviewing corporations claiming professional fees paid over $5000. So, if your corporation has claimed professional fees over $5000, then your corporation could be selected for a random audit and CRA may look at you more closely and may compare figures reported on your corporate returns to other corporations in your industry.
Leads from another Audit: Another company you are doing business with gets audited and they have claimed expense of $40,000 paid to you on their corporate return. Therefore, an equal amount should be reported as income on your tax return. If when CRA verifies that expense claimed on one side is being reported as income on the other side, and if its not the case, then there is a 100% chance of you being audited next and where a simple income and expense audit could lead to, you do not really want to take that risk.
Additional Ways CRA Discovers Non-Compliance
Informant Leads Program/Snitch Line: The CRA takes abuse of Canada's tax laws very seriously. When an individual or business does not fully comply with tax legislation, an unfair burden is placed on law-abiding taxpayers and businesses, and the integrity of Canada's tax base is jeopardized. This is mostly used by ex-spouses, ex-employees, or your competitors. It takes a simple phone call or an email or a fax to CRA to upset your life and disclose about your foreign income properties or about your undisclosed sources of income. The new Offshore Tax Informant Program (OTIP) allows the CRA to make financial awards to individuals who provide information related to major international tax non-compliance that leads to the collection of taxes owing.
Online Websites: Most businesses in Canada now have a website promoting their business. CRA always look for leads and if you have a website promoting your business, but not reporting the income of that website on your tax return, CRA will find you. There is already a column on your statement of business activities form where you have to disclose the address of your website or any online platform that you are using for online sales.
Personal Account Deposits: When a large amount of sum is deposited into your bank account from overseas, banks have a legal obligation to inform CRA of the deposit. The CRA in many cases contact the taxpayers to find out the nature of the deposit. The deposit could be a lending hand from your family or could be a loan from overseas or it could be your own savings before you migrated to Canada. But if you cannot support the deposit and explain CRA, the CRA will treat it as your income and penalties up to 250% could be charged on those funds if not properly explained.
Sale of Real Estate/Land Transfer: Every real estate (Sale and Purchase) transaction in Canada is recorded in the land registrar office. The CRA has access to all the information regarding what properties are sold and bought in Canada. So, if you sell a property in Canada even your principal residence and do not report the sale in your tax return, there is 95% chance CRA would contact you and ultimately you would be charged huge penalties and interest for not reporting the sale. You can claim a Principal Residence Exemption(PRE) when you sell your principal residence, but reporting is must.
Information sharing agreements: Canada has tax treaties with majority of the nations in the world and have information sharing agreements where they continuously share and collect information and help each other to combat the tax evasion.
Frequently Asked Questions
Will the CRA Audit me because I am filing VDP? No. The VDP is a totally separate program from audit program. If CRA starts auditing because taxpayers are disclosing their personal information to CRA, then the whole idea behind VDP would fail and no one will come forward and use VDP.
Will I go to Jail? VDP removes the threat of criminal prosecution. This program allows you to report previously unreported income. If there is fraud or other criminal activity outside the scope of the voluntary disclosure, then you will need to consult a criminal lawyer.
Do I need a lawyer to file my VDP request? We often get contacted by lawyers preparing VDP for clients to prepare tax returns for taxpayers using VDP. The lawyers would then use the tax returns prepared by us and file VDP on behalf of clients. As a professional accountant, we can prepare your returns and correlate the information from tax returns and better present your VDP application as we understand in depth each line item on your tax return.
What if I don't have all the documents to support my income? Many taxpayers we meet do not have all the documents required to better present a VDP application. But we have been able to present your application to CRA in a most responsive and honest manner that CRA would understand the situation and allow the VDP in most cases.
What if the CRA says "request not accepted" after I file my VDP? Before we even send your application to CRA under VDP, we will review your case and make sure it meets the criteria of VDP. If it does not, we will not use VDP and try to find another way to better represent you. If you have not been contacted by CRA and or currently being audited, then you don't have to worry.
Will it affect my spouse or kids because of filing VDP? Your spouse and kids will not be affected because of you using the VDP. Your spouse may indirectly be affected as she may now have to pay back child tax benefit payments or GST/HST credit as those benefit payments are indirectly related to family income.
What is your fee to file VDP on my behalf? Our fee is on a case by case basis. But we are proud to say that with our expertise in VDP and technical hands on experience, our fees are very reasonable as compared to other professional tax firms providing the same level of service.
Taxpayer relief provisions
Understanding Taxpayer Relief Provisions
The Canada Revenue Agency (CRA) administers legislation that gives the CRA discretion to:
- •cancel or waive penalties and interest
- •accept certain late, amended, or revoked income tax elections
- •issue a refund or make an adjustment to refund or reduce tax payable beyond the normal 3-year period for an individual, a graduated rate estate and, for certain tax years, a testamentary trust
This legislation is commonly called the "taxpayer relief provisions".
Types of relief provisions
Cancel or waive penalties and interest:
When events beyond your control prevent you from meeting your tax obligations, cancelling or waiving penalties and interest may be possible. You may request relief of penalties and interest. The Canada Revenue Agency (CRA) will consider all requests. To apply to have penalties and interest cancelled or waived, you need to explain why you are asking for this relief. The following are common situations:
- •Extraordinary circumstances
- •Financial hardship
- •Actions of the CRA
- •Other circumstances such as that do not fall within the situations described above
Amend, revoke, or file a late tax election:
A late tax election is when a taxpayer asks the CRA for permission to make a tax related decision after the normal filing deadline has passed. In certain circumstances, a taxpayer can choose between using a default set of tax rules (i.e. standard process) or electing (choosing) an alternative set of rules. These "elections" give taxpayers options and flexibility in handling their financial matters. The Canada Revenue Agency (CRA) may allow you to modify or cancel elections that have already been filed, or file an election even if you missed the deadline.
Extend the deadline for a tax refund or reassessment:
The Income Tax Act (ITA) sets a 3-year limitation period on issuing a refund or reducing an amount payable. There are certain circumstances when the Canada Revenue Agency (CRA) may consider issuing a refund or reducing an amount owing beyond the normal 3-year period.
You may qualify for VDP or taxpayer relief request, please contact us at 905-605-4775.