CRA Voluntary Disclosure

The Voluntary Disclosure Program (VDP) in Canada is a policy offered by the Canada Revenue Agency (CRA) that allows taxpayers, whether individuals, corporations, or trusts, who have failed to comply with their tax obligations, to voluntarily come forward and correct their past mistakes. By applying, they may receive relief from penalties, reduced interest and immunity from tax evasion prosecution.

The VDP is designed to encourage compliance by giving Canadian taxpayers the opportunity to fix issues such as undeclared income, unreported offshore assets or income, hidden crypto income, unfiled tax returns, or incorrect information in previous filings, without facing the full consequences typically associated with non-compliance.

To apply for the VDP, taxpayers must first ensure they meet 5 key criteria. They are:  

• Voluntariness: The application must be made before the CRA initiates any enforcement action or any investigations in relation to the taxpayer’s disclosure. Generally, only one VDP application per taxpayer is allowed.
• Completeness: The taxpayer must disclose all relevant prior non-compliance.
• Time: The disclosed non-compliance must be at least one year or one reporting period overdue.
• Penalty: There must be a potential penalty related to the applicant’s prior non-compliance.
• Payment: The applicant must either include payment of the estimated tax owing, or a request for a payment arrangement, subject to CRA approval.

Steps to Apply:

1. Download and Complete Form RC199 – Available on the CRA’s website or submit a detailed letter answering all applicable questions.
2. Gather Documentation: Include financial statements, tax slips, receipts, and any other relevant document that supports the disclosure.
3. Choose the Correct Program: Ensure you select the right program for your disclosure application. There are 3 programs, namely:
   • General Program: For unintentional errors; offers full penalty relief and up to 50% interest relief.
   • Limited Program: For intentional non-compliance; offers no interest relief.
   • Wash Transactions Category: For GST/HST cases; offers the same relief as the General Program.
4. Consult a Tax Lawyer: For most cases, consulting an experienced tax lawyer is recommended to ensure the application meets all requirements and that the taxpayer is fully protected from CRA.
5. Submit the Application: Applications can be submitted online via CRA’s sign-in services, by fax, or by mail. Await CRA’s response to determine the next steps.

Most taxpayers and registrants are eligible to apply for the Voluntary Disclosure Program (VDP).

Taxpayers include individuals, employers, corporations, partnerships, and trusts.

Registrants eligible for the program include GST/HST registrants and claimants, excise duty licensees and registrants, excise tax licensees, excise tax refund claimants, and air travelers security charge registrants. Additionally, the program applies to designated air carriers, registered exporters of softwood lumber products, and persons required to report or remit amounts on account of tax.

No, the CRA grants VDP relief on a case-by-case basis to taxpayers and registrants who voluntarily come forward to fix errors or omissions in their tax filings before the Canada Revenue Agency (CRA) knows or contacts them about it.

The taxpayer must ensure that their application meets CRA’s 5 key conditions and are advised to seek the counsel of an experienced Canadian tax lawyer before applying, as tax lawyers can ensure the application meets CRA’s criteria.

Also, it is be noted that every taxpayer normally has only one opportunity to submit a voluntary-disclosure application. A second VDP application is only considered by the CRA under exceptional circumstances beyond the taxpayer’s control and the second application must address a different issue than the first application.

There are 5 conditions to be met before a VDP application is accepted. They are:

• Voluntariness: The application must be made before the CRA initiates any enforcement action or any investigations in relation to the taxpayer’s disclosure. Generally, every taxpayer only has one opportunity to file a VDP application.
• Completeness: The taxpayer must disclose all relevant prior non-compliance.
• Time: The disclosed non-compliance must be at least one year or one reporting period past due.
• Penalty: There must be a potential penalty related to the applicant’s prior non-compliance.
• Payment: The applicant must either include payment of the estimated tax owing, or a request for a payment arrangement, subject to CRA approval.

Yes, there is a 90-day time limit, starting from the Effective Date of Disclosure (EDD), i.e., the day the CRA receives your completed application. Extensions can be requested in writing to the Minister of National Revenue through the Assistant Director of the Enforcement Division of the Tax Services Office (TSO).

Note: The maximum relief available is subject to a 10-year limitation period. Only interest and/or penalties accrued within the past 10 years from the Effective Date of Disclosure of a voluntary disclosure application are eligible for relief.

The processing time for a CRA Voluntary Disclosures Program (VDP) application can vary depending on the complexity of the case, the volume of applications, and the specific circumstances.

For voluntary disclosures beyond the 10-year limitation, the CRA generally does not offer penalty or interest relief for issues older than 10 years from the application date. The VDP’s 10-year restriction means that only tax years within this recent timeframe are eligible for penalty relief. Taxes owed for periods beyond this 10-year window are still payable if discovered, but relief under the VDP won’t apply to penalties and interest for those years. This limitation encourages taxpayers to address issues sooner rather than waiting, as years beyond the limit aren’t protected by the program’s standard benefits.

However, even if CRA does not offer financial relief for years beyond this 10-year period, taxpayers still benefit from protection against potential tax evasion prosecution when using the VDP.

If the CRA approves your Voluntary Disclosure Program (VDP) application under the General Program track, you gain several key benefits:

1. Freedom from Legal Consequences
   • Avoid CRA tax evasion prosecution, audits, and criminal charges related to the disclosed information.
2. Interest Relief
   • Usually receive a 50% reduction on interest owed for past amounts (covering 4–10 years of unpaid taxes).
3. Penalty Waivers
   • Escape penalties for late filing, failure to file, or inaccuracies in previous returns.
4. Restoration of Tax Benefits
   • Regain access to essential tax credits and benefits, such as:
     • Canada Child Benefit
     • GST/HST Credits
     • RRSP Contribution Room Carryforwards
       

By addressing your tax issues through the VDP, you not only resolve past non-compliance but also secure your financial entitlements moving forward.

Yes, the Voluntary Disclosure Program (VDP) underwent significant changes in 2018, which led to the introduction of new conditions that narrowed the available reliefs, while concurrently creating two new separate tracks: the General Program (which permits penalty relief and partial interest relief) and the Limited Program (which permits waiver of gross negligence penalties, but not interest or other penalties). The Limited Program applies where there is an element of intentional conduct by the taxpayer or a related party. The CRA decides which track the taxpayer will be eligible for, but this decision is not normally conveyed to the taxpayer until after the application is made.

Also, to have a valid VDP application, 5 key conditions must be met. They are:

• Voluntariness: Apply before the CRA initiates any enforcement action or investigation.
• Completeness: The disclosure must cover all instances of non-compliance.
• Time: Non-compliance must be over a year or one reporting period overdue.
• Penalty: There should be a potential penalty for prior non-compliance.
• Payment: Payment of estimated tax owing or a request for a payment arrangement must be included.

Canadian taxpayers can access experienced CRA VDP tax lawyers through Taxlawyer.com, serving all provinces and territories including:

Our voluntary disclosure tax lawyers will help you navigate all VDP requirements, ensure your files are in order, hire a tax accountant on your behalf – if required – so as to ensure that all communications are protected by the solicitor-client privilege, and increase your chance at having a successful VDP application.

Take the first step toward resolving your tax issues. Contact us today for expert guidance with your Voluntary Disclosure Application