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Understanding the New Canadian Voluntary Disclosure Rules Effective October 1

Véronique Laporte, Sam Lackman, Aaron Patrick Belcher
11/28/2025
Understanding the New Canadian Voluntary Disclosure Rules
Contact a Trusted Crowe BGK Advisor
On October 1, Canada implemented significant changes to its voluntary disclosure program (VDP), marking a pivotal shift in how individuals and businesses can come forward to rectify previous inaccuracies or omissions in their tax filings. These new rules aim to enhance fairness, increase compliance, and ensure that the program is not misused by those willfully evading tax obligations.
 
The Canada Revenue Agency (CRA) has long maintained a voluntary disclosure program as a means for taxpayers to correct past errors—such as unreported income, incorrect deductions, or missed filings—without facing full penalties or prosecution. Historically, the VDP provided significant relief for those who proactively disclosed their tax issues before the CRA took action.

Key Changes Effective October 1

The new voluntary disclosure rules, effective October 1, bring several noteworthy changes:
 
You must meet all 5 conditions below: 

1.   You must submit your application voluntarily and before CRA takes any enforcement action against you or a related taxpayer

  • Applications will be considered not voluntary, and therefore not eligible for relief under the VDP, only if an audit or investigation has been initiated against the taxpayer or registrant (or a related taxpayer or registrant) in respect of the disclosed information. 
  • Audits or investigations include those conducted by authorities other than the CRA. Under the new VDP policy, taxpayers and registrants who receive communications from the CRA about potential (but not actual) non-compliance issues may qualify for relief under the VDP.

2.   You must include all relevant information and documentation (includes all returns, forms, and schedules needed to correct the error or                   omission)
3.   Your information involves an application or potential application of a penalty
4.   Your information is at least 1 year or 1 reporting period past due
5.   You must include payment of the estimated tax owing, or request a payment arrangement (subject to CRA approval)

 

The new VDP policy replaces the existing “General Program” and “Limited Program” application streams with the following two tiers of relief:

  1. General relief (unprompted application): Taxpayers and registrants who submit a VDP application without receiving prior communication from the CRA about an identified compliance issue related to the disclosure may qualify for 75% relief of applicable interest and 100% relief of applicable penalties. An application made following receipt of an education letter or notice offering general guidance related to a particular topic will be considered unprompted.
  2. Partial relief (prompted application): Taxpayers and registrants who submit a VDP application following communication from the CRA about an identified compliance issue related to the disclosure may qualify for 25% relief of applicable interest and up to 100% relief of applicable penalties. An application will also be considered prompted if it is made after the CRA has received information from a third party regarding the potential tax non-compliance.

For all VDP applications that are eligible for relief, gross negligence penalties will not apply and no referral for prosecution will be made on the disclosed issues.

Implications for Taxpayer and Advisors

The revised rules underscore the CRA's intention to balance the opportunity for honest taxpayers to correct mistakes with the need to deter deliberate evasion. 

Best Practices Under the New Rules

  1. Act Promptly: File a voluntary disclosure before the CRA initiates any contact or enforcement action.
  2. Prepare Complete Documentation: Gather all relevant records and provide detailed explanations to support your disclosure.
  3. Assess Payment Obligations: Be prepared to pay estimated taxes owing at the time of the application.
  4. Consult a Professional: Engage a qualified tax advisor to navigate the more stringent requirements and maximize the prospect of relief.

The new voluntary disclosure rules in Canada, effective October 1, reflect a broader trend toward increased transparency and enforcement in tax compliance. Taxpayers should familiarize themselves with the new rules to ensure compliance and avoid unnecessary penalties or prosecution.
 
It should be noted that Revenu Quebec has not, to date, followed suit with making changes to its voluntary disclosure program and, therefore its existing rules remain in force.