The Voluntary Disclosure Program (“VDP”) was established more than 50 years ago to encourage taxpayers to correct inaccurate or incomplete filings, or to disclose information not previously reported to the Canada Revenue Agency (CRA). The program covers various areas of taxation, including income tax and GST/HST.

The VDP is intended to entice taxpayers to voluntarily correct delinquencies in their previous tax affairs and return to the tax system by providing penalty and/or interest relief and may even alleviate the fear of criminal prosecution if certain circumstances and conditions are met.

An effective VDP can bring significant underground tax dollars—which may otherwise be lost—into the tax system, particularly with respect to offshore compliance matters, where it is naturally more difficult for CRA enforcement activities to identify instances of non-compliance.

In 2018, the CRA implemented several limiting administrative changes to the VDP, which effectively reduced the attractiveness of the program for dealing with many potential instances of non-compliance. These changes and a number of concerns with them were described in the following series of SPARK articles: “Is an opportunity to rectify your taxes slipping away?” (September 26, 2017) and “Updates to the Voluntary Disclosure Program” (February 18, 2018).

It appears that the 2018 changes to the VDP resulted in a significant drop in disclosures, since CRA has released new guidelines that revert to more relaxed qualification requirements and provide greater and more certain relief from interest and penalties.

The new VDP is meant to be a simpler framework that removes some of the barriers for taxpayers to voluntarily disclose errors and omissions, effective as of October 1, 2025.

Some key changes to the program include:

Elimination of the General / Limited Programs (2018 program)

Under the previous program, disclosures were categorized by the CRA as qualifying either under a General or Limited program. This two-track system created uncertainty over the level of relief applicants would be afforded. 

Introduction of Prompted and Unprompted Streams (2025 program)

The degree to which penalty and/or interest relief may be granted under the new program will depend on whether the disclosure is prompted or unprompted.

To qualify under the VDP, an application must be voluntary.

Although an application will not be considered voluntary if an audit or investigation has been initiated against the taxpayer or a related taxpayer in respect of information being disclosed, “prompted” disclosures could still qualify for relief under the new program.

Prompted disclosures include disclosures made following verbal or written communication about an identified compliance issue related to the disclosure. This could include education letters, requests to file, and third-party leaks. Previously, these would fall under more broadly defined “Enforcement Actions” that would generally disqualify the voluntariness of the application.

The new program provides unprompted applications with 100% penalty relief and 75% interest relief for all years.  Prompted applications may qualify for up to 100% penalty relief and 25% interest relief.

Situations of egregious or intentional non-compliance, such as deliberate tax evasion or fraud, will continue to be restricted from eligibility under the program. However, qualifying disclosures approved for the program will now be eligible for some degree of penalty and/or interest relief, irrespective of the taxpayer’s size, sophistication, or culpability.

More Clarity on What Constitutes a Complete Disclosure

Another requirement of the VDP is that disclosures must be materially complete. This means the taxpayer must provide all relevant information for all required tax years and disclose all known errors and omissions.

Previously, the CRA required taxpayers to provide support for all years and issues disclosed with the initial application. This could have presented uncertainty for disclosures involving non-compliance dating back many years, where information may no longer be available.

The new program limits the number of years for which information is required to be provided to the most recent 6 years, or 10 years for errors/omissions related to assets or income located outside of Canada. However, additional documentation for tax years beyond these timeframes may still be requested by the CRA at its discretion.

Similar Increased Eligibility and Greater Relief for GST/HST Disclosures

Similar changes described above apply to the VDP program with respect to GST/HST disclosures.

The relaxed criteria for voluntariness laid out above will also apply to GST/HST disclosures, with relief provided for prompted and unprompted streams. Unprompted applications will normally be granted 100% relief on penalties and 75% relief on interest, while prompted applications will normally be granted 100% relief on penalties and 25% relief on interest.

Wash transactions (i.e., transactions or errors involving no net “tax seepage” from the system) can receive full 100% relief of the applicable penalties and interest.

GST/HST disclosures require documentation for the most recent 4 years to be filed as part of a complete disclosure.

In conclusion, the increased certainty and expanded relief from penalty and interest reinstated by the new VDP may present an attractive opportunity for more taxpayers to correct errors and omissions in their past tax filings. Clients who have identified delinquencies in their prior year tax filings are encouraged to contact their Shimmerman Penn LLP advisor for advice on accessing the VDP program.