Understanding the Updated Voluntary Disclosures Program (VDP)

The Canada Revenue Agency’s (CRA) Voluntary Disclosures Program (VDP) offers taxpayers an opportunity to correct past tax errors or omissions before the CRA identifies them. If accepted, taxpayers may receive penalty and interest relief and avoid criminal prosecution. However, all taxes owing must still be paid in full.

Effective October 1, 2025, the VDP has undergone significant changes, introducing two categories of applications: unprompted and prompted.

Unprompted Applications

An application is considered unprompted when there has been no prior communication from the CRA about a specific compliance issue. For example, if the disclosure follows a general education letter, it qualifies as unprompted. These applications typically receive 75% interest relief and full penalty relief (general relief).

Prompted Applications

Prompted applications occur after CRA contacts the taxpayer about a specific error or omission, or when CRA has received third-party information suggesting non-compliance. These applications generally qualify for 25% interest relief and up to full penalty relief (partial relief).

For both types, gross negligence penalties and criminal prosecution will not apply.

Eligibility Requirements

To qualify for VDP relief, applications must meet these conditions:

• Voluntary: No audit or investigation has begun on the disclosed information.
• Past Due: For income tax, the disclosure must relate to a tax year at least one year past its filing deadline.
• Interest or Penalties: The error or omission must attract interest or penalties.
• Complete Disclosure: All relevant information and supporting documents for the last six years (or ten years for foreign income/assets) must be included.
• Payment: Tax owing must be paid or a payment arrangement requested.
• Future Compliance: Taxpayers must remain compliant after relief is granted.