CRA announces streamlined Voluntary Disclosures Program

Overview

The new policy applies to VDP applications received on or after 1 October 2025. IC00-1R7 applies to income tax VDP matters, while GST/HST Memorandum 16-5-1 applies to VDP matters relating to GST/HST, excise taxes, excise duties, the fuel charge, the luxury tax, the underused housing tax, the digital services tax, tax under the Global Minimum Tax Act (GMTA), the softwood lumber products export charge and the air travellers security charge.

Applications received prior to 1 October 2025 will be considered for VDP relief under the 2018 Policy.

The key changes to the VDP can be summarized as follows:

• Expanded eligibility: Applications will be considered not voluntary, and therefore not eligible for relief under the VDP, only if an audit or investigation has been initiated against the taxpayer or registrant (or a related taxpayer or registrant) in respect of the disclosed information. Audits or investigations include those conducted by authorities other than the CRA. Under the new VDP policy, taxpayers and registrants who receive communications from the CRA about potential non-compliance issues may qualify for relief under the VDP.

This change softens the more restrictive 2018 Policy, under which the CRA often would not accept a VDP application from taxpayers or registrants who had been contacted by the CRA.

• Two tiers of relief: The new VDP policy replaces the existing “General Program” and “Limited Program” application streams with the following two tiers of relief:
  • General relief (unprompted application): Taxpayers and registrants who submit a VDP application without receiving prior communication from the CRA about an identified compliance issue related to the disclosure may qualify for 75% relief of applicable interest and 100% relief of applicable penalties. An application made following receipt of an education letter or notice offering general guidance related to a particular topic will be considered unprompted.
    
    
  • Partial relief (prompted application): Taxpayers and registrants who submit a VDP application following communication from the CRA about an identified compliance issue related to the disclosure¹ may qualify for 25% relief of applicable interest and up to 100% relief of applicable penalties. An application will also be considered prompted if it is made after the CRA has received information from a third party regarding the potential tax non-compliance.

The VDP continues to provide 100% relief of applicable penalties and interest for applications involving GST/HST “wash transactions”² that qualify for reduced penalties and interest under GST/HST Memorandum 16-3-1, Reduction of Penalty and Interest in Wash Transaction Situations.

For all VDP applications that are eligible for relief, gross negligence penalties will not apply and no referral for prosecution will be made on the disclosed issues.

Under the 2018 Policy, taxpayers and registrants who qualify under the General Program are generally only eligible for relief from penalties and 50% of the applicable interest. For VDP applications concerning income tax, this partial interest relief was limited to assessments for years preceding the three most recent years of returns required to be filed. Under the Limited Program, no penalty and interest relief were available; however, for all VDP applications eligible for relief under the 2018 Policy, gross negligence penalties would not apply and no referral for prosecution would be made on the disclosed issues.³

• Broader statutory coverage: The new VDP policy in GST/HST Memorandum 16-5-1 expressly includes additional regimes, including the Underused Housing Tax Act (UHTA), the Select Luxury Items Tax Act (SLITA), the Digital Services Tax Act (DSTA) and the GMTA.
  
  
• Clearer documentation scope: For VDP applications involving multiple years of non-compliance, taxpayers and registrants should include supporting documents for the following periods:
  • Foreign-sourced income or assets: The most recent 10 years
    
    
  • Canadian-sourced income or assets: The most recent six years
    
    
  • GST/HST-related information: The most recent four years

Documentation is not required for any taxation years or reporting periods within the above periods that have no errors or omissions. Taxpayers and registrants should be prepared to provide additional documents to the CRA upon request.

• Process improvements: The CRA will release a simplified version of Form RC199, Voluntary Disclosures Program (VDP) Application, on 1 October 2025.

Under the 2018 Policy for income tax matters, relief was subject to the 10-year limitation period under subsection 220(3.1) of the Income Tax Act (ITA), and this limitation will continue to apply to VDP applications accepted under the CRA’s new policy. For VDP applications made under GST/HST Memorandum 16-5-1, relief is provided in accordance with the limitation periods for relief and interest found in the relevant Acts.

Comparison

The following table compares key details of the new VDP policy to the 2018 Policy:

Key takeaways

The CRA’s broadened view of when a VDP application is “voluntary” means that many taxpayers and registrants who were ineligible for relief under the 2018 Policy may now qualify for relief under the new VDP policy. 

The new VDP policy provides stronger incentives to make an application for relief. These include the ability to obtain more generous relief of applicable interest for unprompted applications and the ability to obtain partial relief of applicable interest and discretionary relief of applicable penalties for prompted applications, which generally would not have been eligible for any relief under the 2018 Policy.

Finally, the CRA’s clarified guidance on what documents to include in a VDP application, and the simplified Form RC199, will be welcome for taxpayers and registrants considering making an application under the VDP.

Next steps

• Leverage pre-disclosure discussions: The anonymous, informal and non-binding pre-disclosure channel continues to be available. Taxpayers and registrants may wish to participate in preliminary discussions with the CRA to gauge their eligibility for the VDP and the potential relief available.
  
  
• Triage non-compliance issues now: Taxpayers and registrants who have not yet received communication from the CRA about an identified compliance issue should consider filing a VDP application before receiving any letter or notice that could disqualify them from general (unprompted) relief.
  
  
• Gather documentation in accordance with the new requirements: The revised Form RC199 will be available as of 1 October 2025. Processes should be implemented to produce the documents for the relevant years expeditiously.

Learn more

For more information, contact your EY or EY Law advisor or one of the following professionals:

Adrienne Woodyard
+1 416 943 4541 | adrienne.woodyard@ca.ey.com

Jadys Bourdelais
+1 514 879 6380 | jadys.bourdelais@ca.ey.com

Kim Cledera
+1 416 943 2285 | kim.cledera@ca.ey.com

Selena Ing
+1 416 943 4567 | selena.ing@ca.ey.com

Jonathan Ip
+1 403 206 5409 | jonathan.ip@ca.ey.com

Jasmine Jolin
+1 514 874 4302 | jasmine.jolin@ca.ey.com

Scott Joly
+1 403 206 5604 | scott.joly@ca.ey.com

Marc Lesage
+1 514 874 4449 | marc.lesage@ca.ey.com

Neil Mather
+1 780 638 5869 | neil.mather@ca.ey.com

David D. Robertson
+1 403 206 5474 | david.d.robertson@ca.ey.com

Evelyn Tang
+1 403 206 5308 | evelyn.tang@ca.ey.com

Lindsay Turcotte
+1 514 879 2751 | lindsay.turcotte@ca.ey.com   

_____________________

1. Communication may be written or verbal and can include letters or notices (excluding education letters) that identify a specific error or omission on the taxpayer or registrant’s account, or contain a deadline to correct an error or omission.
2. A wash transaction arises when a taxable supply (other than a supply taxable at 0%) is made and the supplier does not remit net tax because the tax was not correctly charged and collected from a registrant who would have been entitled to a full input tax credit had the tax been correctly applied.
3. In general terms, the Limited Program offers limited relief for applications disclosing non-compliance involving intentional actions by the taxpayer or registrant. Applications by corporations with gross revenue exceeding $250 million in at least two of their last five taxation years are generally considered under the Limited Program.