CRA Voluntary Disclosures Program (VDP)

Overview: A Modernized Approach to Voluntary Disclosure

The Canada Revenue Agency (CRA) has released a new version of its Voluntary Disclosures Program (VDP), outlined in Information Circular IC00-1R7. This updated policy applies to applications received on or after October 1, 2025, replacing the earlier IC00-1R6 version.

The new VDP emphasizes fairness, accessibility, and consistency across tax types. It simplifies the structure, introduces clear definitions for “unprompted” and “prompted” applications, and updates documentation requirements and review procedures.

While the previous program divided applications into General and Limited categories, the new framework focuses instead on the timing and nature of disclosure — making it easier to understand and more predictable for taxpayers seeking to correct past errors.

Purpose and Scope of the VDP

The Voluntary Disclosures Program allows taxpayers to proactively correct errors or omissions in previously filed returns, or to disclose unreported income, inaccurate information, or missed filings. In exchange, the CRA may provide:

• Penalty relief

• Interest relief

• Protection from criminal prosecution

It’s important to note that the VDP does not erase taxes owing — those must still be paid or arranged for in full. The program simply reduces the punitive consequences of late or incorrect filings.

The VDP applies to a broad range of taxes and levies, including:

• Income Tax

• GST/HST

• Withholding taxes

• Excise taxes and duties

• Fuel charge (Greenhouse Gas Pollution Pricing Act)

• Luxury tax (Select Luxury Items Tax Act)

• Underused Housing Tax

• Digital Services Tax

• Global Minimum Tax

• Air Travellers Security Charge

• Softwood Lumber Products Export Charge

This expanded scope confirms the CRA’s commitment to consistent treatment across its compliance programs.

Who Can Apply

Any taxpayer — individual, corporation, trust, or partnership — can apply to the VDP, provided the following eligibility conditions are met:

1. The disclosure is voluntary (not prompted by CRA enforcement).

2. It relates to a tax year at least one year past the filing due date.

3. It involves an error or omission that resulted in taxes owing, penalties, or interest.

4. All relevant information and supporting documents are provided promptly and completely.

5. Payment or a payment arrangement for estimated tax owing is made.

Certain applications are not eligible, including those that:

• Would result in a refund or zero tax owing

• Seek relief from penalties or interest already assessed

• Attempt to make or amend a tax election

• Relate to years under bankruptcy or insolvency

• Depend on an advance pricing arrangement or competent authority decision under a tax treaty

The CRA may also reject an application if it finds the taxpayer did not make a complete disclosure or if the information suggests intentional avoidance.

Determining Whether a Disclosure Is “Voluntary”

For the CRA to grant VDP relief, the application must be voluntary. This means that at the time of application, the taxpayer must not be under audit, enforcement action, or investigation related to the same issue.

Unprompted Application

An application is considered unprompted if:

• It is made before any communication (verbal or written) from the CRA regarding an identified compliance issue, or

• It follows only an education letter or general guidance notice offering filing information, not a specific request for correction.

Prompted Application

An application is prompted if:

• It is submitted after the CRA contacts the taxpayer about a specific error, omission, or compliance issue, or

• It follows a notice that identifies a specific problem or includes a deadline to comply, or

• The CRA has already received third-party information indicating potential non-compliance by that taxpayer or a related taxpayer.

In either case, a disclosure ceases to be voluntary once an audit or investigation begins. Even verbal communication identifying an issue can move a case from “unprompted” to “prompted.”

Levels of Relief Available

The amount of relief granted depends on whether the disclosure is considered unprompted or prompted.

In both cases, gross negligence penalties will not apply for the issues disclosed.
Relief is granted in accordance with the limitation period under subsection 220(3.1) of the Income Tax Act, which generally allows relief within ten calendar years from the end of the tax year.

While this structure resembles the previous program’s “General” and “Limited” streams, IC00-1R7 makes the criteria clearer, increasing predictability and reducing administrative subjectivity.

Documentation Requirements

To be eligible for relief, the taxpayer must fully disclose all known errors and omissions and include supporting documentation.

Required Documentation

• Form RC199 – Voluntary Disclosures Program Application

• Relevant returns, schedules, statements, and forms

• Information for the most recent six years (or ten years for income or assets outside Canada)

• Names of any tax professionals or promoters involved in the underlying matter

• Supporting explanations and calculations

Tax years within those periods that have no errors or omissions do not need to be included. However, the CRA may still request older records if warranted.

If books and records are unavailable, the taxpayer must make reasonable efforts to estimate income, expenses, or balances.

The Application Process

Step 1: Optional Pre-Disclosure Discussion

Taxpayers uncertain about whether to proceed can request an anonymous pre-disclosure discussion with a CRA official. This informal process helps them understand the potential risks and benefits without revealing their identity.

Note: These discussions are non-binding and do not protect against enforcement action if a full application is not filed.

Step 2: Submitting the Application

Applications can be filed:

• Online through the CRA’s secure My Account, My Business Account, or Represent a Client portal

• By mail or fax to:
  Voluntary Disclosures Program, Shawinigan National Verification and Collections Centre
  4695 Shawinigan-Sud Boulevard, Shawinigan QC G9P 5H9
  Fax: 1-888-452-8994

Step 3: Payment or Payment Arrangement

Applicants must pay or arrange to pay the estimated taxes owing. While the CRA may accept payment arrangements, approval is not guaranteed and will be reviewed by CRA Collections.

Step 4: CRA Review and Effective Date

When an application is received, the CRA will assign an Effective Date of Disclosure (EDD) — the date used to determine the scope of relief. If the application qualifies, interest and penalties are reduced accordingly.

During review, the CRA may consult internal specialists (e.g., Transfer Pricing Review Committee) to evaluate technical matters.
The CRA may also audit the disclosure later; the VDP grants relief from penalties and prosecution but not immunity from reassessment of tax itself.

CRA Decision and Redress Mechanisms

After review, the CRA will issue a written decision confirming whether relief is granted.

If the taxpayer disagrees, several administrative and judicial options exist:

1. Second Administrative Review
   A written request can be made to the Assistant Director, Shawinigan National Verification and Collections Centre for reconsideration by a new officer not involved in the original decision.

2. Judicial Review
   Taxpayers may apply to the Federal Court under section 18.1 of the Federal Courts Act within 30 days of the CRA decision if they believe discretion was not exercised fairly.

3. Taxpayer Relief Provisions (IC07-1R1)
   If interest or penalties remain after a VDP decision, taxpayers can separately request relief under the general taxpayer relief provisions.

Objection rights under subsection 165(1.2) do not apply to VDP decisions, as they are discretionary rather than statutory assessments.

Post-Disclosure Obligations

Receiving VDP relief does not end a taxpayer’s compliance obligations. Applicants must:

• Remain fully compliant for future tax years

• Respond to CRA requests for additional information

• Pay any remaining balances under agreed-upon terms

The CRA may consider a new disclosure from the same taxpayer only if it relates to different issues or circumstances beyond their control.

Brief Summary of Key Differences from the Previous Policy

While IC00-1R7 largely continues the principles of IC00-1R6, a few structural improvements are notable:

• Simplified classification: “Unprompted” and “prompted” applications replace “General” and “Limited” programs.

• Defined interest relief: Clear percentages (75% and 25%) rather than partial relief tied to prior years.

• Expanded coverage: Explicit inclusion of newer taxes (e.g., Underused Housing Tax, Digital Services Tax, Global Minimum Tax).

• Standardized documentation: Six-year domestic and ten-year foreign look-back periods.

• Formal second review mechanism: Provides procedural fairness for disputed outcomes.

These refinements aim to make the process more transparent, consistent, and accessible for both taxpayers and advisors.

Strategic Considerations for Taxpayers

1. Act Early — Submitting before any CRA contact preserves “unprompted” status and access to maximum relief.

2. Prepare Thoroughly — Incomplete or inconsistent disclosures can invalidate eligibility.

3. Evaluate Timing — Applications filed before October 1, 2025, fall under the old IC00-1R6 rules.

4. Consider Pre-Disclosure Discussions — They provide insight but must be followed by a full application for protection.

5. Work with a Professional — A CPA familiar with the new VDP framework can assess risks, structure submissions, and communicate with the CRA on your behalf.

Final Thoughts

The new CRA Voluntary Disclosures Program (IC00-1R7) marks a major step toward clarity and fairness in voluntary compliance. By distinguishing “unprompted” and “prompted” applications and providing transparent relief levels, the CRA encourages taxpayers to come forward proactively while maintaining the integrity of Canada’s self-assessment system.

For those who have fallen behind on filings, under-reported income, or inadvertently made errors, the VDP provides a structured opportunity to correct the record and regain compliance — often with substantial penalty and interest relief.

Need Assistance?

Correcting past non-compliance can be complex. At Modern Axis CPA, we help individuals and businesses assess eligibility, prepare documentation, and navigate the CRA’s new VDP process with precision and confidentiality.

Contact Modern Axis CPA to schedule a confidential consultation and discuss whether a voluntary disclosure is right for you.