Introduction: Understanding the Purpose of the VDP
The Canada Revenue Agency’s Voluntary Disclosures Program (VDP) is a cornerstone of Canada’s tax compliance system. It provides a structured and legally recognized way for taxpayers to address past mistakes or omissions in their tax filings. In essence, the VDP is a form of tax amnesty: it encourages individuals and businesses to come forward voluntarily to correct past non-compliance without facing the harshest penalties or the threat of criminal prosecution.
To qualify, a disclosure must be both voluntary and complete. That means the taxpayer must apply before the CRA begins enforcement action on the matter, and the application must reveal all instances of non-compliance, supported by amended tax filings. Importantly, while the VDP offers relief, it does not absolve taxpayers of their obligations. Those using the program must still pay the taxes owed and at least part of the accumulated interest.
In September 2025, the CRA announced major changes to the VDP. Effective October 1, 2025, these changes broaden eligibility, simplify procedures, and ease some of the burdens on taxpayers seeking to correct past errors.
This article explains how the program worked before October 2025, how it will operate going forward, and why consulting with an experienced Canadian tax lawyer remains crucial when making a disclosure.
The VDP Before October 2025: The Old Framework
Under the existing rules, the VDP distinguished between two main categories:
- General Program: Designed for taxpayers whose non-compliance was due to carelessness or honest mistakes. It provided relief from all penalties and partial relief from interest.
- Limited Program: Applied in more serious cases involving deliberate non-compliance or sophisticated taxpayers. It offered protection against criminal charges and relief from gross negligence penalties, but no relief from regular interest or other monetary penalties.
The multi-tiered system was seen as rigid and punitive in some situations, discouraging certain taxpayers from coming forward.
The Overhauled VDP: New Rules from October 1, 2025
The CRA has modernized the program, issuing two updated guidance documents: Information Circular IC00-1R7 for Income Tax Act matters and GST/HST Memorandum 16-5-1 for Excise Tax Act cases.
The agency has stated that these reforms aim to make the program “more accessible and easier to understand.” Key changes include:
- A simplified application form (Form RC199).
- Expanded eligibility criteria.
- Two new relief categories: general relief and partial relief.
- Plain-language updates to CRA policy documents.
Perhaps the most important change is the treatment of “prompted” disclosures. Under the old system, if a taxpayer had received an education letter or other CRA communication before applying, their disclosure was usually disqualified. The new rules introduce a partial relief stream that allows such applications, offering a more realistic pathway for taxpayers already on the CRA’s radar.
The CRA has also eased the completeness requirement. While taxpayers must still disclose all instances of non-compliance, they now only need to file amended returns for the last six years—or ten years if foreign income or assets are involved. Previously, amended filings were required for every affected year, which often created an overwhelming burden.
General Relief vs. Partial Relief
The new system eliminates the old General and Limited Programs, replacing them with a two-tier model:
- General Relief (unprompted applications): Full penalty relief, 75% interest relief, and protection against prosecution. This is more generous than the previous General Program, which capped interest relief at 50% and offered no relief if the return was less than three years overdue.
- Partial Relief (prompted applications): Available when a taxpayer applies after receiving CRA communication about a specific compliance issue. It offers up to full penalty relief and 25% interest relief. This option did not exist before and provides significant opportunities for taxpayers who would previously have been barred.
The CRA has retained full relief for GST/HST wash transactions, where no net tax loss arises because one party would have claimed the input tax credit on their GST/HST return had the other charged GST/HST.
Side-by-Side Comparison of Relief
| VDP Category | Pre-October 2025 | Post-October 2025 |
| General/Unprompted | 100% penalty relief; 50% interest relief (none if return <3 years late); protection from prosecution | 100% penalty relief; 75% interest relief; protection from prosecution |
| Limited | Protection from prosecution and gross negligence penalties; no interest relief | Eliminated |
| Prompted/Partial | Not eligible | Up to 100% penalty relief; 25% interest relief; protection from prosecution |
| GST/HST Wash | 100% penalty and interest relief | 100% penalty and interest relief |
Pro Tax Tips: Why a Canadian Tax Lawyer is Essential for VDP Applications
The revamped VDP is more accessible, but it remains a highly technical process with significant risks. Some taxpayers will now benefit from the partial-relief stream, but others may be excluded if their conduct is deemed “egregious or intentional.” Determining eligibility under the correct category—unprompted versus prompted—can make the difference between generous relief and no relief at all.
An experienced Canadian tax lawyer provides several crucial advantages:
- Solicitor-client privilege: Communications with a lawyer are confidential and cannot be compelled by the CRA. By contrast, conversations with an accountant are not privileged and may be used against you. A tax lawyer can engage an accountant on your behalf so that all work falls under privilege.
- Risk assessment and strategy: A knowledgeable Canadian tax lawyer can review your full tax history, evaluate whether disclosure is complete, and determine whether the CRA may try to classify your application as prompted.
- Experience with CRA procedure: Our expert Canadian tax lawyers have filed thousands of voluntary disclosures over decades. We know how to structure applications to maximize relief and, if necessary, prepare for judicial review if the CRA improperly denies an application.
The decision to disclose past non-compliance should not be taken lightly. A voluntary disclosure is a legal remedy that carries both opportunity and risk. To ensure your rights and financial interests are fully protected, retaining a Canadian tax lawyer is the most prudent first step.
Frequently Asked Questions
When do the CRA’s new VDP rules take effect?
The new rules apply to voluntary-disclosure applications received on or after October 1, 2025.
How do the new rules differ from the old VDP framework?
The biggest changes are: (i) amended returns are only required for the last 6 years (10 years for foreign income or assets), and (ii) a new partial-relief category now exists for disclosures prompted by CRA communications.
What relief is available under the new general relief category?
Taxpayers who apply before receiving any CRA compliance communication can receive 100% penalty relief, 75% interest relief, and full protection against criminal prosecution.
What happens if my disclosure is prompted by a CRA communication?
Under the new rules, you may still qualify for partial relief—something that was not available under the old system. This can include up to 100% penalty relief and 25% interest relief.
Disclaimer:
This article provides broad information. It is only accurate as of the posting date. It has not been updated and may be out of date. It does not give legal advice and should not be relied on as tax advice. Every tax scenario is unique to its circumstances and will differ from the instances described in the article. If you have specific legal questions, you should seek the advice of a Canadian tax lawyer.