FAQ - CRA Voluntary Disclosure Program
Canada Revenue Agency’s (“CRA”) Voluntary Disclosure Program provides taxpayers with the opportunity to disclose non-compliance with Canadian tax laws. For example, unreported income or offshore property. In exchange, the taxpayer will not be criminally prosecuted and will receive relief from financial penalties and interest. The program is an effective method to correct tax matters and achieve compliance with Canada’s tax laws.
The General Track is for unintentional noncompliance and if accepted the taxpayer receives complete relief from penalties (financial or criminal) and partial interest relief.
The Limited Track is for intentional noncompliance and if accepted the taxpayer receives partial relief from financial penalties, relief from criminal prosecution but no interest relief.
– failure to abide by tax legislation obligations
– unreported income
– overstated expenses
– unremitted CPP/EI
– unfiled returns
– unreported offshore income or properties
– similar…
If the disclosed information is accepted under the General Track interest relief is provided for the 10 years previous to the year the Voluntary Disclosure is filed except for the most recent 3 years. The standard relief amount is 50% of the accrued interest.
If the disclosed information is accepted under the Limited Track there is no interest relief.
If the disclosed information is accepted under the General Track there will be no financial penalties and no criminal prosecution.
If the disclosed information is accepted under the Limited Track there will be no gross negligence penalties (50% of the tax owing) and no criminal prosecution. There will be other financial penalties such as a late filing penalty.
The application must:
– be voluntary
– be complete
– involve the application or potential application of a penalty
– include information that is at least one year past due, and
– include payment of the estimated tax owing (arranging payment plans are possible).
All tax returns and associated forms and schedules must be submitted with the application. CRA may request additional documentation and information. You can request additional time to submit the documents. Form RC199, Voluntary Disclosures Program (VDP) is the official application form. This can be attached to a more detailed application letter.
Before the changes to the program in 2018, taxpayers were able to make an anonymous application. They only had to disclose their identity upon acceptance. This is no longer the case. However, CRA will discuss the facts of a disclosure on an anonymous basis. This is helpful for situations where a taxpayer is unsure that the conditions for acceptance have been met.
– no tax owing for the unfiled tax return
– elections pursuant to the legislation
– advance pricing arrangement applications
– taxpayer is in receivership or bankruptcy
– post-assessment requests for penalty and interest relief
– applications that depend on an agreement being made at the discretion of the Canadian competent authority under a provision of a tax treaty
CRA will consider a payment arrangement. If the taxpayer cannot pay the tax owing in one payment this should be noted in the application.
A second application will only be considered under special circumstances including that it relates to a different matter and was unintentional. Nevertheless, CRA will rarely accept a second application. However, this is distinct from appealing a denied voluntary disclosure.
A taxpayer can request a Second Administrative Review by CRA. If that is denied the taxpayer has the right to apply to the Federal Court for Judicial Review of CRA’s decision. A taxpayer cannot file a Notice of Objection to the assessments from the disclosure except under certain circumstances.
