David Rotfleisch on the CRA Revamping the Voluntary Disclosures Program (VDP) – Fix Unintentional Filing Errors & Omissions Now, with Reduced Penalties, Interest Payments

Overview: Core Principles of the Voluntary Disclosures Program

The Voluntary Disclosures Program (VDP)—often referred to as a tax amnesty program—is a key element of the Canada Revenue Agency’s (CRA) compliance framework. It provides taxpayers with a formal opportunity to correct past tax errors or omissions. Designed to promote voluntary compliance, the VDP allows individuals and businesses to come forward and fix inaccuracies in their filings without facing criminal prosecution or the most severe penalties, ultimately supporting a fair and efficient tax administration system.

To be eligible for relief under the Voluntary Disclosures Program (VDP), a taxpayer’s application must meet specific requirements. Most importantly, the disclosure must be genuinely voluntary—the taxpayer must come forward before the Canada Revenue Agency (CRA) begins any compliance action related to the matter (see more about prompted disclosures below). In addition, the disclosure must be complete, meaning it fully reveals all instances of non-compliance and includes amended tax returns that correct the identified issues for the applicable years (see more about the number of years of tax returns required below).

While the VDP offers meaningful relief, it is not a loophole for avoiding legal obligations. Participants must still pay all outstanding taxes and a portion of the related interest. Importantly, the program’s intent is not to reward non-compliance but to give taxpayers a chance to correct mistakes and align with their legal responsibilities without being placed in a better financial position than those who complied from the start.

To encourage more non-compliant taxpayers to come forward and resolve their tax issues, the Canada Revenue Agency (CRA) has announced an overhaul of the Voluntary Disclosures Program (VDP), easing the criteria for taxpayers seeking tax amnesty. These more lenient VDP rules will apply to voluntary-disclosure applications received by the CRA on or after October 1, 2025.

This article outlines the key differences between the current rules of the CRA’s Voluntary Disclosures Program and the new VDP framework taking effect on October 1, 2025. It also concludes with pro tax insights from our experienced Canadian tax lawyers to help taxpayers navigate the updated program effectively.

Evolution of the VDP: Canada’s Disclosure Framework Before October 2025 Reforms

Under the old framework—applicable to the VDP rules in effect before October 1, 2025—the Canada Revenue Agency’s Voluntary Disclosures Program operates under a multi-tiered structure that distinguishes between varying degrees of taxpayer non-compliance. This system is organized into two primary streams: the “General Program” and the “Limited Program.”

The General Program serves as the standard route, designed for taxpayers whose non-compliance arose from inadvertent errors, omissions, or carelessness rather than intentional misconduct. This stream offers significant benefits, including full relief from penalties and partial relief from interest charges.

In contrast, the Limited Program targets more serious or deliberate cases of non-compliance, such as those involving intentional tax avoidance or sophisticated tax planning. Although this stream still shields taxpayers from criminal prosecution for tax evasion, it provides no interest relief and only exempts taxpayers from gross-negligence penalties—meaning that all other applicable penalties remain in force.

The VDP Overhaul: Disclosures Filed on or After October 1, 2025

Starting October 1, 2025, the Canada Revenue Agency’s Voluntary Disclosures Program (VDP) will undergo major reforms aimed at broadening access and simplifying compliance. These updates are detailed in two new CRA circulars: (1) Information Circular IC00-1R7, which governs voluntary disclosures related to non-compliance under the Income Tax Act, and (2) GST/HST Memorandum 16-5-1, which covers non-compliance under the Excise Tax Act.

According to a September 10, 2025, CRA news release, the revised VDP seeks to “make it easier [for taxpayers] to correct unintentional filing errors or omissions and make the program more accessible.” Among the most notable updates are a streamlined application form (Form RC199), expanded eligibility criteria, the creation of two new relief categories—“general relief” and “partial relief”—and clearer documentation standards for applicants.

Overall, these revisions represent a strategic realignment of the CRA’s compliance approach. By introducing flexibility for “prompted” applicants—those who may have been influenced to come forward after limited CRA contact—the new regime departs from the previous strict “all-or-nothing” voluntariness requirement that defined the pre-October 2025 framework.

In recent years, the Canada Revenue Agency (CRA) has increasingly issued “education letters” to groups of taxpayers, alerting them to potential areas of non-compliance. Under the previous VDP rules, receiving such a letter before filing a voluntary-disclosure application often disqualified the taxpayer from relief. The CRA typically treated an education letter as an “enforcement action,” meaning that any application submitted afterward was no longer considered voluntary, thereby invalidating the taxpayer’s eligibility under the program.

Under the new VDP regime, this strict voluntariness condition has been relaxed. A new partial-relief category now accommodates applications that are “prompted” by prior CRA communication—whether verbal or written—regarding the same compliance issue addressed in the disclosure. This change recognizes that some taxpayers may only become aware of their reporting obligations after receiving CRA correspondence, without necessarily engaging in deliberate non-compliance.

To make the program more accessible, the CRA is also simplifying its processes. A new, streamlined version of Form RC199 (Voluntary Disclosures Program Application) will be launched on October 1, 2025, designed to make filing more intuitive. In addition, the new VDP circulars—Information Circular IC00-1R7 and GST/HST Memorandum 16-5-1—have been rewritten in plain, user-friendly language to help taxpayers better understand the rules and requirements.

While the CRA has simplified certain procedural aspects of the VDP, the core eligibility requirements remain largely unchanged. To qualify for relief, a voluntary-disclosure application must still be voluntary, complete, and involve an error or omission that could trigger a penalty. It must also relate to a tax year or reporting period at least one year past its due date and include payment of the tax owed or a request for a payment arrangement.

That said, the new VDP rules have eased the burden on taxpayers by clarifying the scope of disclosure required. While applicants must still “disclose all known errors and omissions,” they are now only required to submit amended tax returns covering the last six years of non-compliance. However, if the issue involves foreign income or assets, the disclosure must include amended returns for the past ten years.

In other words, before October 2025, the VDP obligated taxpayers to (i) disclose all instances of non-compliance and (ii) file amended tax returns for each and every tax year affected by those errors.

If taxpayers failed to include amended returns for all affected years, they risked having their voluntary-disclosure applications rejected by the CRA for not meeting the VDP’s completeness requirement.

Under the new VDP rules taking effect after October 2025, taxpayers are still required to disclose all instances of non-compliance. However, they now only need to file amended tax returns covering the most recent six years—or ten years if the non-compliance involves foreign income or assets.

The CRA retains the discretion to request additional documentation for tax years or reporting periods outside these limits. Nevertheless, this change significantly reduces the administrative burden of the old regime and simplifies the disclosure process for taxpayers with extended periods of non-compliance or incomplete historical records.

Perhaps the most notable procedural shift is the replacement of the previous General Program and Limited Program with two new tiers of relief: general relief and partial relief. This modernized structure tailors the scope of amnesty to the taxpayer’s circumstances—particularly whether the disclosure was voluntarily made or prompted by prior CRA communications.

General relief is the highest level of relief available under the new Voluntary Disclosures Program and applies to unprompted applications—those filed before the CRA makes any contact or communication regarding the taxpayer’s potential non-compliance.

Applicants under this tier receive full (100%) relief from all applicable penalties and 75% relief from interest that would otherwise be charged. This represents an improvement over the former VDP’s General Program, which offered only 50% interest relief—and none at all if the return was less than three years overdue.

Partial relief, on the other hand, is a newly introduced category designed for prompted applications—those submitted after the CRA has already contacted the taxpayer about a specific compliance issue that the application addresses. (Taxpayers may still qualify for general relief if they received only a broad educational letter or general guidance from the CRA, rather than a specific compliance notice.)

Under the partial-relief tier, taxpayers may receive up to 100% relief from penalties and 25% relief from interest. This marks a major shift from the pre-October 2025 regime, where any prior CRA communication would have automatically disqualified an application from VDP relief.

A dedicated category for GST/HST “wash transactions” continues under the new Voluntary Disclosures Program. This category provides full (100%) relief from both penalties and interest. It applies in cases where a registrant has misreported GST/HST, but even if the reporting had been correct, the Canada Revenue Agency would not have collected any additional tax. Such cases typically occur when a supplier fails to charge and collect GST/HST from a recipient who, had the tax been charged, would have been fully entitled to claim input tax credits (ITCs). From the CRA’s standpoint, the result is tax-neutral—in other words, a “wash.”

The table below outlines how the relief tiers under the pre-October 2025 and post-October 2025 VDP regimes compare.

Pro Tax Tip: The Key Role of a Canadian Tax Lawyer in Applying for VDP

The post-October 2025 Voluntary Disclosures Program (VDP) marks a major shift in the Canada Revenue Agency’s (CRA) approach to tax compliance. By introducing a pathway for “prompted” disclosures, the new framework broadens access for taxpayers who made unintentional filing errors but have already had preliminary contact with the CRA. The general-relief tier offers enhanced interest relief, while the simplified application process is designed to make participation more straightforward and accessible.

However, submitting a voluntary-disclosure application remains a legally and administratively intricate process. The CRA’s explicit exclusion of taxpayers who are “egregiously or intentionally non-compliant” eliminates the old “Limited Program” as a fallback option, establishing a clearer boundary that places significant weight on how a taxpayer’s conduct is initially assessed.

In addition, the CRA’s heightened focus on proactive compliance measures—combined with its expanding enforcement capabilities—has fundamentally reshaped the risk landscape for taxpayers contemplating disclosure.

Taken together, these changes highlight the critical importance of consulting a qualified Canadian tax lawyer when preparing a voluntary-disclosure application. The VDP is not merely an administrative filing; it is a legal process involving nuanced determinations—such as whether an application qualifies as unprompted after CRA communications—and potentially high-stakes financial and legal consequences. Engaging a Canadian tax lawyer ensures that taxpayers receive strategic guidance, legal protection, and representation throughout the process.

The most compelling reason to engage a Canadian tax lawyer is the protection afforded by solicitor-client privilege—a cornerstone of Canadian law. This privilege safeguards all confidential communications between a client and their lawyer made for the purpose of seeking or providing legal advice. It allows taxpayers to communicate openly and honestly with their tax lawyer about any past non-compliance, without fear that such discussions or documents could later be seized or used against the taxpayer or the accountant by the Canada Revenue Agency (CRA).

This protection is exclusive to lawyers; accountants and other financial professionals do not benefit from solicitor-client privilege. Communications with an accountant, even when related to tax advice, can be compelled by the CRA and potentially used as evidence in an audit or investigation.

Therefore, if you are seeking tax advice but wish to ensure your information remains confidential, you should first consult a Canadian tax lawyer. A strategic advantage of doing so is that your lawyer can retain an accountant on your behalf to prepare or amend tax filings. This structure brings the accountant’s work under the umbrella of solicitor-client privilege, ensuring that your entire disclosure process remains legally protected. It’s a critical risk-management strategy for any taxpayer engaging with the CRA’s Voluntary Disclosures Program (VDP).

Beyond privilege, our Canadian tax lawyers bring deep technical expertise and strategic insight. They can conduct a comprehensive risk assessment to evaluate your eligibility for VDP relief and determine whether a prompted or unprompted disclosure is the optimal path forward.

This often includes a detailed review of financial records to identify unreported income, omitted information, or other potential compliance gaps—conducted entirely under the protection of legal privilege. This step is crucial, as the CRA requires that every voluntary-disclosure application be “complete.” Any undisclosed errors can lead to the CRA denying your application, initiating a tax audit, and using the very information you provided against you.

Our experienced Canadian tax lawyers have successfully handled thousands of voluntary-disclosure applications over the past 30 years. We understand the technical nuances of what makes a disclosure “complete” under CRA standards and can help you craft a compelling and compliant submission that meets every requirement while minimizing future risk.

With the new VDP framework, every application must now be classified as either “unprompted” or “prompted,” adding another layer of legal complexity. Our top Canadian tax lawyers can review any prior CRA communications and advocate for your inclusion in the most advantageous relief tier available.

Deciding to come forward and correct past tax non-compliance is a serious legal step—one that can determine whether you achieve long-term financial stability or face severe penalties and potential prosecution. The VDP is not an administrative shortcut; it is a legal remedy governed by strict CRA rules. The most prudent course of action is to consult a Canadian tax lawyer before you file. Engaging a lawyer from the outset ensures your matter is protected by solicitor-client privilege, allowing for a thorough, confidential, and risk-free assessment of your situation.

Our Certified Specialist in Taxation—an expert Canadian tax lawyer—has guided hundreds of taxpayers in obtaining tax amnesty under the CRA’s Voluntary Disclosures Program. We can strategically plan and efficiently prepare your voluntary-disclosure application to maximize your chances of approval. A well-prepared VDP application not only improves the likelihood of receiving full relief but also lays a strong foundation for a judicial-review challenge in the Federal Court if the CRA unfairly denies your disclosure.

To determine whether you qualify for relief under the Canada Revenue Agency’s Voluntary Disclosures Program, schedule a confidential and privileged consultation with one of our expert Canadian tax lawyers.

FAQs (Frequently Asked Questions)

I’ve heard that the CRA is changing the VDP. Is this correct? And when will the changes take effect?

Yes. To encourage more non-compliant taxpayers to come forward and resolve their tax issues, the Canada Revenue Agency has announced a major overhaul of the Voluntary Disclosures Program. The updated framework relaxes the eligibility requirements for tax amnesty and introduces more flexible qualification criteria. These new, more favourable VDP rules will take effect for voluntary-disclosure applications submitted to the CRA on or after October 1, 2025.

How is the post-October 2025 Voluntary Disclosures Program different from the pre-October 2025 version?

To begin with, the new VDP rules now explicitly clarify that while taxpayers must “disclose all known errors and omissions,” they are only required to file amended tax returns for the last six years of non-compliance. If the non-compliance involves foreign income or assets, amended returns must be submitted for the last ten years.

By contrast, under the pre-October 2025 VDP, taxpayers had to both (i) disclose all instances of non-compliance and (ii) submit amended tax returns for every affected year. Failure to include amended returns for all years could result in the CRA denying the application for failing the program’s completeness requirement.

Under the new post-October 2025 VDP, taxpayers still need to disclose all instances of non-compliance, but amended tax returns are required only for the last six years (or ten years if foreign income or assets are involved).

The CRA may still request supporting documents for periods outside those timeframes, but this update significantly reduces the administrative burden and simplifies compliance for taxpayers with many years of unreported activity or incomplete records.

The most notable operational shift under the new rules is the replacement of the General Program and Limited Program with two new relief tiers: General Relief and Partial Relief. This modernized structure aligns the level of tax amnesty with the taxpayer’s situation—particularly whether or not the disclosure was prompted by prior CRA contact.

General Relief is the highest level of relief and applies to unprompted voluntary-disclosure applications—those made without prior CRA communication regarding the specific issue. Taxpayers in this category receive 100% penalty relief and 75% interest relief, along with protection from criminal prosecution. This is more generous than the pre-October 2025 General Program, which offered only 50% interest relief, and none if the tax return was filed less than three years late.

Partial Relief is a new category designed for prompted voluntary-disclosure applications—those made after the CRA has contacted the taxpayer about a specific compliance concern addressed in the disclosure. Taxpayers can still receive up to 100% penalty relief and 25% interest relief, as well as protection from criminal prosecution. Importantly, taxpayers who receive only a general CRA education letter or guidance notice—rather than a targeted compliance communication—may still qualify for General Relief.

This new Partial Relief tier marks a significant expansion of eligibility, providing an opportunity for taxpayers who would have been automatically disqualified under the previous VDP regime to now qualify for meaningful relief.

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DISCLAIMER: This article is intended for general informational purposes only and reflects the law as of the posting date. It has not been updated and may no longer be current. The content does not constitute legal advice and should not be relied upon as such. Each tax situation is unique and may differ from the examples discussed. You should consult a Canadian tax lawyer for advice tailored to your circumstances.