Voluntary Disclosure

The Voluntary Disclosure program (VDP) is a program offered by the Canada Revenue Agency (CRA) that allows taxpayer to come forward and correct errors or omissions on their tax return or to disclose any previously unreported income without facing penalties or prosecution.  The program is designed to encourage taxpayers to come forward voluntarily and correct any mistakes, rather than waiting for the CRA to discover them through an audit or investigation. 

Under the VDP, taxpayer can voluntarily disclose any errors or omissions on their tax returns or disclose any previously unreported income.  In return, the CRA will waif penalties and may also waive some or all the interest owed.  However, taxpayers are still required to pay any taxes owed because of the disclosure. 

The VDP is available to individuals, corporations, partnerships, and trusts, and can be used for both domestic and international tax issues.  However, it is important to note the VDP is not a blanket amnesty program, and taxpayers who knowingly or willfully evade taxes or make false statements are not eligible for the program.  However, for taxperys who have made unintentional errors or omissions, the VDP can be a valuable tool for correcting their tax affairs and avoiding penalties and prosecution. 

Guidance regarding VDP is provided in IC00-1R6 – Voluntary Disclosures Program of CRA. As per this Information Circular, there are two tracks to VDP applications:

1. General Program
2. Limited Program
   
   
3. General Program
   If a VDP application is accepted under the general program. The application will be eligible for penalty relief and partial interest relief.
   
   
4. Limited Program
   If a VDP application is accepted under the Limited program, the taxpayer will received reduced relief under the VDP. Limited program is applicable if it is a disclosed that non-compliance was an intentional conduct on the part of the taxpayer or a closely related party.
   
   Under the limited program, a taxpayer will not be provided any relief from interest and will be charged other penalties as applicable.

A VDP application must meet the following five conditions to be valid and to quality for relief. The application must:

1. Be Voluntary
2. Be Complete
3. Involve the application or potential application of a penalty
4. Include information that is at least one year past due
5. Include payment of the estimated tax owing.
   
   
6. Be Voluntary:

A VDP will not be voluntary if:

1. The taxpayer was aware of, or had knowledge of an enforcement action set to be conducted with respect to the information being disclosed to the CRA.
2. Enforcement action relating to the subject matter of the VDP application has been initiated against the taxpayer, or a person related to the taxpayer.
3. The CRA has already received information regarding the specific taxpayer’s potential involvement in tax-non-compliance.
   
   
4. Be Complete:

A taxpayer’s VDP application must be made for all relevant taxation years where there was previously inaccurate incomplete or unreported information regarding their tax affairs, including any non-arm’s length transactions. Even though the information provide must be completed, the application may not be disqualified simply because it contains minor errors or omissions.

• Involve the application or potential application of a penalty:

A request for VDP relief must involve the application, or potential application of a penalty. The penalty type that could normally be imposed may be a late filing penalty, a failure to remit penalty, an installment penalty, an omission penalty, or a gross negligence penalty.

• Include information that is at least one year past due

The VDP must include information that relates to a taxation year that is at least one year past the due date for filing. The program is not meant to be used as a de facto filing extension. However, an application that includes information that relates to a taxation year that is more than one year past due and information that is more recent may be considered.

• Include payment of the estimated tax owing

The taxpayer must include payment of the estimated tax owing with their VDP application. When the taxpayer does not have the ability to make payment of the estimated tax owing at the time of the VDP application, they may request to be considered for a payment arrangement subject to approval from CRA Collections Officials.

If the above conditions are met, a taxpayer should use Form RC 199, Voluntary Disclosures Program (VDP) to apply for VDP. If RC 199 form is not utilized, the VDP application should contain all of the information requested on the RC 199 form. All CRA returns, forms and schedules needed to correct the non-compliance must be included with the application.

It is expected that if requested by CRA, taxpayer or their representative will co-operate in providing any additional documentation or information related to the VDP subject.

A VDP application can be submitted through online services (“My Account, “My Business Account, Represent a Client”, by mail, or by fax to CRA.

If you have any questions regarding a Voluntary Disclosure Program, please don’t hesitate to contact us. Shajani LLP Chartered Professional Accountants and Advisors have a team of Calgary Accountants, Edmonton Accountants and Red Deer Accountants ready to assist you in your personal and corporate tax filings and tax planning strategy.   

This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. ©2023 Shajani CPA.

Shajani CPA is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning services.