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CRA ArticlesJune 27, 20250 comments

Voluntary Disclosure Program: Fixing Past Mistakes

Voluntary Disclosure Program: Fixing Past Mistakes Before the CRA Finds Them

Navigating the complexities of Canada’s tax system is no easy task for the taxpayers, and even the most diligent taxpayers can make an honest mistake. Inaccuracies and omissions in tax filings, undisclosed offshore income or being late with your tax return can all lead to severe consequences from the Canada Revenue Agency (“CRA”). Thankfully, you can correct your own mistakes before the CRA finds them and enjoy the benefit of voluntarily disclosing those errors under the Voluntary Disclosures Program (“VDP”).

In this article, we will explore what the VDP is, who is eligible, and what you need to apply for the program.

What is the Voluntary Disclosure Program – VDP?

The most important thing about the VDP is that you must voluntarily apply and attempt to correct your past errors before the CRA contacts you about them.

Designed for taxpayers to proactively address unreported income, missing returns, or inaccuracies. By encouraging individuals to come forward voluntarily, the VDP promotes compliance and gives taxpayers the opportunity to correct past errors and fulfill their tax obligations.

If the VDP application is accepted by the CRA, the taxpayer still needs to pay any taxes, duties, or charges owed, plus some or all of the interest. However, you may be eligible for relief from penalties. In some cases, accepted applicants may receive up to 100% penalty relief, no gross negligence penalty, and full interest relief. After reviewing the specific facts and merits of each application, the Minister may exercise discretion to grant relief on a case-by-case basis, limited to the penalty and interest accrued in the previous 10 calendar years before the end of the year the disclosure is filed.

Program Streams:

• General Program: For inadvertent errors. Offers full penalty relief and partial interest relief.

• Limited Program: For intentional or serious non-compliance (e.g., large corporations or repeat disclosures). Offers limited relief, no prosecution, but no relief from gross negligence penalties or full interest.

Who is eligible for the VDP?

Most taxpayers and registrants can make an application for the program. To qualify, your disclosure must meet five key conditions:

1. Voluntariness of Disclosure: The application must be submitted before the CRA contacts you about the issue. This includes any notice of (re)assessment or enforcement action against you or a third party related to you.
2. Completeness of Disclosure: All relevant facts, documents, returns and supporting documents must be addressed and included in the application.
3. Penalty: The omission or mistake must lead to the application, or potential application of a penalty. In the event a penalty does not apply, the taxpayer cannot seek relief through the VDP.
4. At least one year past due: The subject taxation period must be at least one year past the due date for filing.
5. Payment: The application must address the payment of the estimated tax owing or request a payment arrangement with the CRA.
6. First time: Generally, the VDP is limited to a one-time use per taxpayer. Only in exceptional circumstances can a taxpayer be permitted to enter the program more than once.

How to apply to the Voluntary Disclosure Program?

To apply, a taxpayer must submit the following to the CRA. The submission can be done online via CRA’s My Account/My Business Account portals, by fax, or by mail:

• A completed Form RC199, or a signed letter with all the required information requested on the form.
• All supporting documents, including: the tax returns, forms or schedules needed to correct the issue; all financial records or receipts; or any relevant specific documents that can support the disclosure.
• An estimated payment of taxes owing (or a request for a payment arrangement).

What’s the Process Like?

1. Gather and Prepare: Make sure you meet the five criteria. Collect all supporting documentation.
2. Submit Disclosure: Use Form RC199 or a detailed letter. Include payment or a payment proposal.
3. CRA Review: The CRA reviews your submission. If incomplete, it may be rejected. If accepted, it will be assessed under either the General or Limited stream.
4. Decision: You’ll receive a written decision outlining the relief granted and any further steps.
5. Payment/Compliance: Pay the remaining taxes owing. Stay compliant going forward—repeat disclosures are unlikely to be accepted.

If your application is accepted, you may benefit from the program through relief from certain penalties and interest, and most importantly, gain protection from prosecution for the disclosed error.

Conclusion:
The VDP is not a get-out-of-jail-free card, it’s a structured program designed to encourage honesty and restore compliance. If you identified the mistake before the CRA and take action to amend it, the program offers meaningful relief and peace of mind.

If you’re unsure whether you qualify or need help submitting your disclosure, consider speaking with a tax professional. Coming clean now could save you from larger consequences later.

***Disclaimer: This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions, you should consult a lawyer.