Overview: The Foundational Principles of the VDP
The Voluntary Disclosures Program (VDP), also known as tax amnesty, is a critical component of the Canada Revenue Agency's compliance framework. It offers taxpayers a structured pathway to rectify past errors or omissions in their tax obligations. At its core, the VDP is a tax-amnesty program intended to encourage voluntary compliance by Canadian taxpayers. It provides a mechanism for individuals and businesses to come forward and correct inaccuracies without the threat of severe penalties or criminal prosecution, thereby promoting an orderly and efficient tax administration system.
To qualify for relief under the VDP, a voluntary-disclosure application must meet several conditions. Most notably, the disclosure must be truly voluntary, meaning that the taxpayer came forward before the CRA initiated any compliance action related to the issue (see more about prompted disclosures below), and it must be complete, meaning that the voluntary-disclosure application divulges all instances of the taxpayer's non-compliance and includes amended tax returns to rectify those compliance problems (see more about the number of years of tax returns required below).
While the CRA's Voluntary Disclosures Program offers significant relief, it's not a mechanism for taxpayers to intentionally avoid their legal obligations. A fundamental principle is that VDP relief shouldn't put a non-compliant taxpayer in a better financial position than a taxpayer who had always complied with tax obligations. Taxpayers who use the VDP must still pay the full amount of tax owed and a portion of the accrued interest.
In an effort to encourage more non-compliant taxpayers to correct their tax problems, the Canada Revenue Agency announced that it will overhaul the Voluntary Disclosures Program by relaxing the criteria to qualify for tax amnesty. These more-favourable VDP rules will apply to voluntary-disclosure applications that the CRA receives on or after Oct. 1, 2025.
This article compares the current rules of the CRA's Voluntary Disclosures Program with the new VDP rules taking effect on Oct. 1, 2025. It concludes by offering pro tax tips from our esteemed Canadian tax lawyers.
The Evolution of Canada's Voluntary Disclosures Program: The VDP Landscape Prior to Oct. 1, 2025
Under the current regime as of this writing—that is, the VDP rules before Oct. 1, 2025—the CRA's Voluntary Disclosures Program employs a multi-tiered system that differentiates between various levels of non-compliance. This regime is/was primarily structured around two main categories: the "General Program" and the "Limited Program."
The General Program was the most common path, intended for taxpayers whose errors were the result of unintentional mistakes or carelessness. This stream provided substantial benefits, including relief from all penalties and partial relief from interest.
The Limited Program, by contrast, was reserved for more complex and serious cases, such as those involving elements of intentional non-compliance or sophisticated taxpayers. Relief under this stream was significantly more restrictive. While it still provided protection from criminal tax evasion charges, there was no relief from interest and only relief from gross-negligence penalties. All other tax-related monetary penalties would still apply.
The VDP's Overhaul: Voluntary Disclosures Submitted on or after Oct. 1, 2025
Effective Oct. 1, 2025, the Canada Revenue Agency's Voluntary Disclosures Program undergoes some fundamental transformations. The CRA outlines these changes in the two new VDP circulars: (1) Information Circular IC00-1R7, which deals with voluntary disclosures involving non-compliance under Canada's Income Tax Act, and (2) GST/HST Memorandum 16-5-1, which deals with voluntary disclosures involving non-compliance under Canada's Excise Tax Act.
As the CRA explained in a news release on Sept. 10, 2025, the changes to the VDP are meant to "make it easier [for taxpayers] to correct unintentional filing errors or omissions and make the program more accessible." The key changes include a simplified application form (Form RC199), a significant expansion of eligibility criteria, the introduction of two new relief tiers—"general relief" and "partial relief"—and clearer documentation requirements.
A close examination of these changes reveals a strategic recalibration of the CRA's compliance model. The new VDP regime—in particular, the inclusion of "prompted" applicants—moves away from a rigid "all or nothing" voluntariness condition, which applied under the pre-October 2025 regime.
In recent years, the CRA has increasingly relied on circulating "education letters" about potential non-compliance issues to targeted groups of taxpayers. Under the old VDP regime, a taxpayer who received such a letter before submitting a voluntary-disclosure application could outright cease to qualify for relief under the Voluntary Disclosures Program: The CRA education letter was often treated as "enforcement action" and thereby rendered the taxpayer's voluntary-disclosure application invalid if the taxpayer filed the application after the CRA issued the education letter.
The new VDP regime relaxes the voluntariness condition by introducing a partial-relief tier specifically for voluntary-disclosure applications that have been "prompted" by the CRA's prior verbal or written communication about a specific tax-compliance issue that the application addresses.
The Canada Revenue Agency also aims to facilitate taxpayer comprehension of the new Voluntary Disclosures Program. The CRA will introduce a new, simplified version of its standard-form VDP application (i.e., Form RC199), which will be available on Oct. 1, 2025. The CRA has also attempted to write the new VDP circulars (i.e., Information Circular IC00-1R7 and GST/HST Memorandum 16-5-1) in "plain language."
Although the CRA has streamlined some procedural aspects of the VDP, the substantive conditions of the Voluntary Disclosures Program remain intact. To qualify for VDP relief, a voluntary-disclosure application must still be voluntary, complete, involve an error or omission with a potential penalty, relate to a tax year or reporting period at least one year past its due date, and include a payment of tax owing or a request for a payment arrangement.
Granted, the Canada Revenue Agency has made the qualification conditions less onerous for taxpayers. For starters, the new VDP rules now make it clear that, although the disclosing taxpayer "must disclose all known errors and omissions," the taxpayer need only submit amended tax returns to correct the non-compliance that occurred during the last 6 years. (If the non-compliance involves foreign income or assets, then the taxpayer must submit amended tax returns to correct the non-compliance that occurred during the last 10 years.)
In other words, under the pre-October 2025 rules, the VDP required taxpayers to both (i) disclose all instances of non-compliance and (ii) submit amended tax returns for every affected tax year.
If taxpayers didn't include amended returns for all years, they risked the possibility that the Canada Revenue Agency might deny their disclosure applications for failing the VDP's completeness requirement.
Under the new post-October 2025 VDP rules, taxpayers must still disclose all instances of non-compliance, but they'll only need to submit amended tax returns for the last 6 years (or 10 years if the non-compliance involved foreign assets or income).
The CRA reserves the right to request additional documentation for tax years or reporting periods that fall outside of these specified timeframes. Still, this development certainly eases the old program's administrative burdens. It also simplifies the voluntary-disclosure process for taxpayers with many years of non-compliance and a lack of old records.
But the most significant operational change to the VDP is the replacement of the General Program and Limited Program with a new system consisting of a general-relief tier and partial-relief tier. This new structure calibrates the tax amnesty based on the circumstances surrounding the taxpayer's voluntary-disclosure application—most notably, whether or not it was prompted by CRA communications.
General relief is the highest tier of relief available under the new VDP and is reserved for unprompted voluntary-disclosure applications. An "unprompted" application is one that was submitted with no prior compliance communication from the CRA.
Taxpayers whose disclosure applications fall in this category will receive 100% relief from the tax penalties that would otherwise apply and 75% relief from the interest that would otherwise apply. This new general-relief tier is more favourable than what the VDP previously offered under the General Program, which granted only 50% interest relief but granted no interest relief if the tax return for the non-compliant year was less than 3 years overdue.
Partial relief is a new category specifically created for prompted voluntary-disclosure applications. A "prompted" application is one submitted after the taxpayer has received compliance communication from the CRA—in particular, CRA communication that identifies a specific tax-compliance issue that's covered in the application. (A taxpayer may still qualify for general relief if the taxpayer receives a non-specific CRA education letter or a CRA notice offering only general guidance about a compliance topic.)
The partial-relief tier provides "up to"100% relief from tax penalties that would otherwise apply and 25% relief from interest that would otherwise apply. This partial-relief tier for prompted voluntary-disclosure applications represents a substantial new avenue for taxpayers who would have been automatically disqualified under the pre-October 2025 VDP regime.
A special category for GST/HST "wash transactions" will remain in place, providing 100% interest and penalty relief. This category covers situations where a registrant has incorrectly reported GST/HST, yet even if the registrant had correctly reported, the Canada Revenue Agency wouldn't have been entitled to any additional GST/HST. This arises in situations where a supplier fails to charge and collect GST/HST from a recipient who, if the GST/HST had been charged, would have been entitled to claim it all as ITCs. From the CRA's perspective, the tax effect of the two situations is neutral—that is, a wash.
The following table compares the relief tiers under the pre-October 2025 VDP regime and the post-October 2025 VDP regime.
| VDP Relief Tier | Pre-Oct 2025 VDP | Post-Oct 2025 VDP |
|---|---|---|
| Unprompted (formerly General) | 100% penalty relief; 50% interest relief; no interest relief if within 3 years of filing deadline; relief from criminal prosecution | 100% penalty relief; 75% interest relief; relief from criminal prosecution |
| Partial/Prompted | Not eligible for relief (disqualified) | Up to 100% penalty relief; 25% interest relief; relief from criminal prosecution |
| Limited | Relief from criminal prosecution and gross-negligence penalties; no interest relief | N/A |
| GST/HST Wash Transactions | 100% penalty and interest relief; relief from criminal prosecution | 100% penalty and interest relief; relief from criminal prosecution |
Pro Tax Tips: The Indispensable Role of a Canadian Tax Lawyer in VDP Applications
The post-October 2025 VDP rules represent a significant evolution in the CRA's approach to tax compliance. By creating a pathway for "prompted" disclosures, the new VDP proves more accessible for taxpayers who have made unintentional errors but have received initial contact from the CRA. The new general-relief tier offers generous interest relief, and the streamlined application process aims to make the program more user-friendly.
Yet a voluntary-disclosure application remains a complex legal and administrative process. The explicit exclusion of taxpayers who are "egregiously or intentionally non-compliant" removes the old "Limited Program" as a safety valve, creating a hard line that places a high premium on the initial determination of a taxpayer's conduct.
The CRA's new policy, coupled with its increasing use of proactive compliance measures and potential new legal powers, fundamentally alters the risk calculus for any taxpayer considering a disclosure.
The impending changes to the VDP, coupled with the CRA's evolving compliance strategies, underscore the critical importance of retaining a Canadian tax lawyer for assistance with voluntary-disclosure applications. The VDP is not merely an administrative process; it is a legal one that involves complex determinations, specifically whether the unprompted category is available after CRA communications, and high-stakes outcomes. A Canadian tax lawyer provides a crucial level of expertise and legal protection that is not available through other professional channels.
The primary and most compelling reason to engage a Canadian tax lawyer is the protection of solicitor-client privilege. This is a fundamental legal principle that protects confidential communications between a client and a lawyer made for the purpose of seeking or giving legal advice. This privilege ensures that taxpayers can have a full and frank communication with their Canadian tax lawyers about all past non-compliance without the fear that this information may be used against them by the CRA, such as by seizing the records of the taxpayer or the accountant.
This legal protection is especially critical because no similar privilege exists for accountants or other financial professionals. Communications with an accountant, even for the purpose of tax advice, remain unprotected. In other words, the Canada Revenue Agency can compel your accountant to divulge your communications and use that information against you. So, if you seek tax advice but want to keep that information away from the CRA, you should approach a Canadian tax lawyer first. Your Canadian tax lawyer can then retain an accountant on your behalf to prepare the necessary tax returns, bringing the accountant's work under the umbrella of solicitor-client privilege. This is a crucial risk-management strategy that protects a taxpayer's entire disclosure effort.
The expertise of a Canadian tax lawyer extends far beyond the protection of privilege. Our expert Canadian tax lawyers can provide you with a strategic advantage by conducting a thorough, initial risk assessment to determine VDP eligibility and the optimal course of action between the prompted and unprompted disclosure streams.
This includes a comprehensive review of your financial records to identify all potential discrepancies or unreported income, a process that can be conducted under the shield of privilege. This is vital because, to qualify for relief under the CRA's Voluntary Disclosures Program, the disclosure application must be "complete." The failure to disclose all known errors can cause the Canada Revenue Agency to deny your voluntary-disclosure application and initiate a tax audit concerning the undisclosed items, and to use the information disclosed against you.
Our knowledgeable Canadian tax lawyers have submitted thousands of voluntary disclosures over the last 30 years and understand the nuances of what constitutes a "complete" disclosure application and can help you craft a narrative that satisfies the CRA's requirements while mitigating future risks.
The CRA's new Voluntary Disclosures Program now requires a determination of whether an application is "unprompted" or "prompted" and therefore adds a new layer of complexity. Our top Canadian tax lawyers can analyze the nature of any prior CRA communications and argue for the most beneficial relief tier.
The decision to come forward and correct a past tax mistake is a profound one. It's a decision that can mean the difference between financial stability and severe financial and legal consequences. The VDP is not an administrative workaround; it is a legal remedy. Therefore, the most prudent and effective strategy is to engage a Canadian tax lawyer once you contemplate filing a disclosure. The protection of solicitor-client privilege alone makes this an essential first step: it allows for a comprehensive, risk-free analysis of your situation.
Our expert Certified Specialist in Taxation, a Canadian tax lawyer, has assisted hundreds of Canadian taxpayers with gaining tax amnesty under the Canada Revenue Agency's Voluntary Disclosures Program.
We can carefully plan and promptly prepare your voluntary-disclosure application. A properly prepared disclosure application not only increases the odds that the CRA will grant tax amnesty but also lays the groundwork for a judicial-review application to the Federal Court should the Canada Revenue Agency unfairly deny your voluntary-disclosure application. To determine whether you qualify for the Canada Revenue Agency's Voluntary Disclosures Program, schedule a confidential and privileged consultation with one of our expert Canadian tax lawyers.
Frequently Asked Questions
I've heard that the Canada Revenue Agency is changing the Voluntary Disclosures Program (VDP). Is this true? When do the changes take effect?
Yes, in an effort to encourage more non-compliant taxpayers to correct their tax problems, the Canada Revenue Agency announced that it will overhaul the Voluntary Disclosures Program by relaxing the criteria to qualify for tax amnesty. These more-favourable VDP rules will apply to voluntary-disclosure applications that the CRA receives on or after October 1, 2025.
How does the post-October 2025 Voluntary Disclosures Program differ from the pre-October 2025 VDP?
For starters, the new VDP rules now make it clear that, although the disclosing taxpayer "must disclose all known errors and omissions," the taxpayer need only submit amended tax returns to correct the non-compliance that occurred during the last 6 years. (If the non-compliance involves foreign income or assets, then the taxpayer must submit amended tax returns to correct the non-compliance that occurred during the last 10 years.)
In other words, under the pre-October 2025 rules, the VDP required taxpayers to both (i) disclose all instances of non-compliance and (ii) submit amended tax returns for every affected tax year. If taxpayers didn't include amended returns for all years, they risked the possibility that the Canada Revenue Agency might deny their disclosure applications for failing the VDP's completeness requirement.
Under the new post-October 2025 VDP rules, taxpayers must still disclose all instances of non-compliance, but they'll only need to submit amended tax returns for the last 6 years (or 10 years if the non-compliance involved foreign assets or income).
The CRA reserves the right to request additional documentation for tax years or reporting periods that fall outside of these specified timeframes. Still, this development certainly eases the old program's administrative burdens.
But the most significant operational change to the VDP is the replacement of the General Program and Limited Program with a new system consisting of a general-relief tier and partial-relief tier. This new structure calibrates the tax amnesty based on the circumstances surrounding the taxpayer's voluntary-disclosure application—most notably, whether or not it was prompted by CRA communications.
General relief is the highest tier of relief available under the new VDP and is reserved for unprompted voluntary-disclosure applications. An "unprompted" application is one that was submitted with no prior compliance communication from the CRA.
Taxpayers whose disclosure applications fall in this category will receive 100% relief from the tax penalties that would otherwise apply and 75% relief from the interest that would otherwise apply. This new general-relief tier is more favourable than what the VDP previously offered under the General Program, which granted only 50% interest relief but granted no interest relief if the tax return for the non-compliant year was less than 3 years overdue.
Partial relief is a new category specifically created for prompted applications voluntary-disclosure applications. A "prompted" application is one submitted after the taxpayer has received compliance communication from the CRA—in particular, CRA communication that identifies a specific tax-compliance issue that's covered in the application. (A taxpayer may still qualify for general relief if the taxpayer receives a non-specific CRA education letter or a CRA notice offering only general guidance about a compliance topic.)
The partial-relief tier provides "up to"100% relief from tax penalties that would otherwise apply and 25% relief from interest that would otherwise apply. This partial-relief tier for prompted voluntary-disclosure applications represents a substantial new avenue for taxpayers who would have been automatically disqualified under the pre-October 2025 VDP regime.
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