The Canada Revenue Agency’s Voluntary Disclosures Program, often called the VDP, has long offered taxpayers a way to correct past tax errors or omissions before the CRA discovers them through audit, investigation, or other compliance activity. As of October 1, 2025, the CRA introduced significant updates to the program, with the stated goal of making it easier to apply, easier to understand, and more accessible to taxpayers and registrants.
For individuals, corporations, employers, trusts, partnerships, and GST/HST registrants in Ontario, the revised VDP may be relevant where there are unfiled returns, unreported income, unpaid source deductions, undisclosed foreign assets, GST/HST issues, or other tax compliance concerns. While the program does not erase the tax debt itself, it may provide relief from penalties, relief from part of the interest, and protection from criminal prosecution for the disclosed issue.
What Is the Voluntary Disclosures Program?
The Voluntary Disclosures Program (VDP) is a discretionary CRA relief program. It allows taxpayers and registrants to come forward to correct errors or omissions in their tax filings and reporting obligations. The CRA reviews each application on a case-by-case basis and decides whether relief should be granted.
The program applies broadly. The CRA’s updated income tax circular refers to disclosures involving income tax, GST/HST, withholding taxes, excise duties, excise taxes, the fuel charge, luxury tax, underused housing tax, digital services tax, tax under the Global Minimum Tax Act, air travellers security charge, and softwood lumber export charges.
This means the VDP is not limited to personal income tax returns. It may also arise in business tax matters, payroll compliance, indirect tax reporting, and foreign asset disclosure issues.
What Changed on October 1, 2025?
The updated VDP applies to applications received on or after October 1, 2025. Applications received before that date are reviewed under the prior VDP policies.
The CRA describes the revised program as less restrictive than the previous version. One notable change is that taxpayers and registrants who have been prompted by certain CRA communications about a potential non-compliance issue may now still be eligible for the program. For example, the CRA refers to education letters about unreported income or claimed ineligible expenses as communications that may no longer automatically prevent eligibility.
The CRA has also introduced two main relief categories: general relief and partial relief. These categories depend on whether the application is considered unprompted or prompted. The updated Form RC199 was also simplified to make the application process easier to use.
General Relief vs. Partial Relief
Under the revised program, an unprompted application will normally be considered for general relief. This generally applies where the taxpayer or registrant comes forward before receiving communication about an identified compliance issue related to the disclosure. The CRA also indicates that an application may still be treated as unprompted if it follows a general education letter or notice that offers general filing guidance.
General relief provides 75% relief of the applicable interest and 100% relief of the applicable penalties. If the application is accepted, the CRA also grants protection from prosecution, and gross negligence penalties will not apply to the disclosed information.
A prompted application will normally be considered for partial relief. This may include situations where the taxpayer or registrant has received verbal or written communication about an identified compliance issue, such as a notice identifying a specific error or omission, or where the CRA has already received third-party information about the possible non-compliance.
Partial relief provides 25% relief of the applicable interest and up to 100% relief of the applicable penalties. Protection from criminal prosecution and protection from gross negligence penalties may still apply where the VDP application is accepted.
Who May Be Eligible to Apply?
Most taxpayers and registrants can apply to the Voluntary Disclosures Program. The CRA lists taxpayers as including individuals, employers, corporations, partnerships, and trusts. Registrants may include GST/HST registrants or claimants, excise duty licensees or registrants, excise tax licensees, air travellers security charge registrants, designated air carriers, softwood lumber exporters, and others required to report or remit tax.
Examples of potentially eligible situations include failing to file a tax return that is now one year late, underreporting income, claiming ineligible expenses, failing to remit employee source deductions, failing to file certain information returns such as a T1135 Foreign Income Verification Statement, failing to report foreign-source income taxable in Canada, or failing to charge, collect, or report GST/HST.
For Ontario businesses, the payroll and GST/HST examples may be particularly important. For individuals, common issues may include unreported income, late-filed returns, foreign asset reporting, or errors discovered after filing.
The 5 Eligibility Conditions
The CRA states that a VDP application must satisfy five conditions to be eligible for relief:
- The application must be submitted before an audit or investigation has been initiated against the taxpayer or a related taxpayer about the information being disclosed.
- It must include all relevant information and documents for the required years or reporting periods.
- It must include an error or omission with applicable interest charges, penalties, or both.
- It must include information that is at least one year or one reporting period past the filing due date.
- It must also include payment of the estimated tax owing, or a request for a payment arrangement, subject to CRA approval.
Disclosure Must Occur Pre-Audit or Investigation
The audit or investigation requirement is important. An application is not considered voluntary if an audit or investigation has already been initiated against the taxpayer or a related taxpayer concerning the information being disclosed. The CRA’s guidance also notes that audits or investigations are not limited to CRA activity and can include certain investigations by law enforcement, securities regulators, or other federally or provincially regulated authorities.
This timing issue can make a significant difference. A taxpayer who waits until after targeted compliance steps have begun may have fewer options under the VDP.
What Must Be Included in the Application?
A VDP application must include the completed Form RC199, Voluntary Disclosures Program Application, along with the returns, forms, statements, schedules, and supporting documents needed to correct the non-compliance. For errors or omissions involving Canadian-source income or assets, the CRA generally requires documentation for the most recent six years. For foreign-source income or assets, documentation for the most recent 10 years must be included. For GST/HST matters, the CRA’s public guidance refers to the most recent four years.
A year or reporting period within those timeframes does not need to be included if there were no errors or omissions for that year or period. The CRA may still ask for additional documents, records, books of account, or other information during its review. Where books and records do not exist, the CRA states that taxpayers should make reasonable efforts to provide estimates.
The taxpayer must also disclose all known errors and omissions. An application may be denied if the CRA determines that the disclosure is incomplete, if requested information is not provided, or if the CRA later learns of other non-compliance issues that were not included in the original disclosure.
Payment Is Still Required
The VDP is not a tax forgiveness program. The taxpayer or registrant remains responsible for paying the tax owing. To be granted relief, the applicant must include payment of the estimated tax owing or request a payment arrangement. The CRA notes that approval of a payment arrangement is not guaranteed and will be reviewed by collections officials.
This distinction is central to understanding the program. The VDP may reduce penalties and part of the interest, and may provide protection from prosecution for the disclosed matter, but it does not eliminate the underlying tax liability. For businesses with payroll, GST/HST, or corporate tax issues, the required payment or payment arrangement can be a major practical part of the disclosure process.
Pre-Disclosure Discussions
The CRA allows taxpayers who are uncertain about whether to apply to request an anonymous pre-disclosure discussion. According to the CRA, this informal discussion can provide insight into the Voluntary Disclosures Program process, the risks of remaining non-compliant, and the relief that may be available.
The pre-disclosure discussion is not binding. It does not guarantee that relief will be granted if the taxpayer later applies. However, it may help a taxpayer or registrant better understand how the CRA may view a potential disclosure before taking formal steps.
The CRA has also introduced a callback request feature that may be used to request a pre-disclosure discussion, check on the status of an application, or ask questions about a decision letter.
What If the CRA Refuses Relief?
A taxpayer or registrant who disagrees with the CRA’s VDP decision cannot file a standard objection to dispute the discretionary VDP relief decision. However, the CRA states that there may be options to request a second administrative review or apply to the Federal Court for judicial review of the Minister’s decision. The CRA generally indicates that taxpayers and registrants should request a second administrative review before applying for judicial review.
In some cases, if a taxpayer does not qualify under the VDP, other relief options may be considered, such as taxpayer relief provisions or a remission review. These are separate processes and depend on the circumstances.
Contact Tierney Stauffer LLP for Comprehensive Business Law Advice in Ottawa, Cornwall, Kingston and North Bay
For individuals, corporations, employers, trusts, partnerships, and business owners in Ontario dealing with CRA voluntary disclosure issues, Tierney Stauffer LLP can help clarify available options before formal steps are taken. Our skilled business lawyers advise clients on CRA tax disputes, Voluntary Disclosures Program applications, tax debt matters, audits, reassessments, and taxpayer relief. To learn more about how we can assist you through the VDP process, please contact us online or call 1-888-799-8057 to schedule a confidential consultation.
