CRA’s Updated Voluntary Disclosures Program: What the October 2025 Changes Mean for Taxpayers
How the CRA’s revised Voluntary Disclosures Program makes it easier for taxpayers to correct past errors while reducing penalties, interest, and prosecution risk.
Effective October 1, 2025, the Canada Revenue Agency (CRA) implemented significant changes to its Voluntary Disclosures Program (VDP). These updates are designed to make the program more accessible, flexible, and taxpayer-friendly, encouraging individuals and businesses to correct past errors or omissions in their tax filings proactively.
For taxpayers across Atlantic Canada, the revised VDP provides enhanced relief from penalties and interest, removes the risk of gross negligence penalties, and clarifies both eligibility and application requirements. Understanding these changes is essential for anyone considering whether a voluntary disclosure is appropriate for their situation.
Overview of the Voluntary Disclosures Program
The VDP allows taxpayers to come forward voluntarily to correct inaccurate or incomplete information previously provided to the CRA, or to disclose information that was not reported at all. When a disclosure is accepted, the CRA may grant relief from penalties and interest and will not refer the matter for criminal prosecution.
Importantly, while penalties and interest relief may apply, all taxes owing must still be paid in full. The VDP is not a forgiveness program, but rather a compliance tool designed to encourage transparency and timely correction of past non-compliance.
Key Changes Effective October 1, 2025: New Application Tracks: “Unprompted” and “Prompted”
The previous “General” and “Limited” categories have been replaced with two clearer application tracks:
Unprompted Applications
These are filed before the CRA has contacted the taxpayer about a specific compliance issue. Unprompted applications are eligible for the most generous relief under the program.
Prompted Applications
These are filed after the CRA has contacted the taxpayer – verbally or in writing – about a specific compliance concern, or after the CRA has received third-party information indicating potential non-compliance. Prompted applications remain eligible for penalty relief, including gross negligence penalties, and partial interest relief, but timing and prior CRA contact are key factors in determining eligibility.
Importantly, receiving general education letters or routine notices from the CRA does not disqualify an application from being considered unprompted, which provides additional flexibility for taxpayers considering early disclosure.
Expanded Eligibility and Broader Scope
The revised VDP now applies to a wider range of taxes and charges, including:
Income tax
GST/HST
Excise duties and taxes
Fuel charge under the Greenhouse Gas Pollution Pricing Act
Luxury tax
Underused Housing Tax
Digital Services Tax
Global minimum tax, and more
Additionally, taxpayers can now apply even if the error or omission only results in interest, not penalties. This expansion allows more taxpayers to benefit from the program and resolve compliance issues before they escalate.
GST/HST wash transactions now qualify for 100% relief from both penalties and interest when the transaction meets CRA criteria, providing certainty for businesses managing these specific cases.
Increased Relief for Penalties and Interest
The updated VDP offers enhanced relief depending on the application track:
Unprompted Applications
100% relief from penalties, including gross negligence penalties
75% relief from interest
Prompted Applications
Up to 100% relief from penalties, including gross negligence penalties
25% relief from interest
GST/HST Wash Transactions
100% relief from penalties and interest where the transaction qualifies
The existing 10-year limitation period remains in place. Relief can only be granted for penalties imposed or interest accrued during the 10 calendar years prior to the application.
Gross Negligence Penalties Will Not Apply
One of the most significant changes to the VDP is the complete elimination of gross negligence penalties for accepted applications. This applies to both unprompted and prompted disclosures.
Gross negligence penalties under the Income Tax Act and other statutes can be substantial, often equal to 50% of the understated tax. Removing these penalties significantly reduces the financial risk associated with coming forward and is intended to encourage taxpayers to correct past non-compliance without fear of the most severe consequences.
Clarified Documentation Requirements
The CRA has clarified the documentation required to support a VDP application:
Canadian-sourced income or assets: Supporting documents for the most recent 6 years
Foreign-sourced income or assets: Supporting documents for the most recent 10 years
GST/HST: Supporting documents for the most recent 4 years
The CRA may request additional documentation outside these timeframes if necessary. Where documents no longer exist, taxpayers are expected to make reasonable efforts to provide accurate estimates.
Payment Arrangements Now Permitted
Taxpayers can now request a payment arrangement for any estimated taxes owing as part of their Voluntary Disclosures Program (VDP) application. This provides greater flexibility for those who may not be able to pay the full balance immediately, allowing taxpayers to spread payments over time while still coming forward voluntarily. Approval is subject to CRA review, and the agency will assess each request on a case-by-case basis, taking into account the taxpayer’s financial situation and the total amount owing. While requesting a payment arrangement does not guarantee acceptance, it can help reduce immediate financial strain and makes the VDP more accessible for both individuals and businesses who want to correct past errors responsibly.
Second and Subsequent Applications
Under the revised program, the CRA may now consider subsequent VDP applications from the same taxpayer in specific situations. This can occur when the new disclosure relates to a different tax matter, or when circumstances beyond the taxpayer’s control prevented the initial disclosure from capturing all relevant information. This change replaces the previous “one-time use” limitation and provides greater flexibility for taxpayers who need to correct multiple issues over time. It also encourages full transparency, as taxpayers can come forward voluntarily to address additional errors without fear that their prior application will limit their eligibility for relief.
Who Is Not Eligible?
Despite the expanded scope, certain applications remain ineligible, including:
Taxpayers under audit or investigation for the same issue
Applications seeking relief for penalties or interest already assessed
Applications to make or amend elections
Matters involving insolvency events, advance pricing arrangements, or discretionary tax treaty issues
Understanding eligibility is critical before submitting an application, as incomplete or ineligible disclosures may be denied.
Application Process and Submission: Required Form
All applications must be submitted using Form RC199 – Voluntary Disclosures Program (VDP) Application. The form requires detailed information about the taxpayer, the nature of the errors or omissions, the affected tax years or reporting periods, and all supporting documentation.
Submission Methods
Completed applications and supporting documents can be submitted using one of the following methods:
Online
My Account (individuals)
My Business Account (businesses)
Represent a Client (authorized representatives)
Fax
1-888-452-8994
Mail
Voluntary Disclosures Program
4695 Shawinigan-Sud Boulevard
Shawinigan, QC
G9P 5H9
Using multiple submission methods may delay processing.
Acknowledgment and Review
The CRA will issue an acknowledgment letter confirming the effective date of disclosure. Applications are reviewed for completeness and eligibility. Failure to provide required documentation or respond to CRA requests may result in denial.
Where a representative submits the application, both the taxpayer and the representative must sign Form RC199, and proper CRA authorization must be in place.
Summary of Available Relief
Under the revised Voluntary Disclosures Program, the level of relief available depends on whether the application is considered unprompted or prompted.
Taxpayers who submit an unprompted disclosure – before the CRA contacts them about a specific compliance issue – are eligible for the highest level of relief. This includes full relief from all penalties, including gross negligence penalties, as well as significant interest relief.
For prompted disclosures, where the CRA has already raised a compliance concern or received third-party information, relief is still available but at a reduced level. In these cases, the CRA may waive penalties, including gross negligence penalties, and provide partial interest relief.
In both scenarios, accepted applications will not be referred for criminal prosecution. While the amount of interest relief differs between unprompted and prompted disclosures, the removal of gross negligence penalties represents a major benefit under the updated program. As with previous versions of the VDP, relief is limited to penalties and interest assessed within the 10 calendar years prior to the application.
Final Thoughts
The CRA’s October 2025 updates to the Voluntary Disclosures Program mark a meaningful shift toward a more flexible and taxpayer-friendly approach to compliance. By expanding eligibility, increasing relief from penalties and interest, and eliminating gross negligence penalties for accepted disclosures, the revised VDP provides taxpayers with a clearer and less punitive pathway to correct past errors or omissions.
That said, the success of a voluntary disclosure still depends on timing, eligibility, and the completeness of the application. Determining whether a disclosure is considered prompted or unprompted, gathering the required documentation, and accurately estimating taxes owing are critical steps. Incomplete or improperly prepared applications may be denied, potentially exposing taxpayers to penalties, interest, or enforcement action.
Taxpayers who are aware of past non-compliance – whether related to income reporting, GST/HST, foreign assets, or newer tax regimes – should consider reviewing their situation sooner rather than later. Acting proactively, before the CRA initiates contact, can significantly improve the level of relief available under the program.
Need Help Planning Ahead?
Our team can help you evaluate whether a voluntary disclosure is appropriate, determine the best timing for an application, and prepare a complete and well-supported submission under the CRA’s updated rules. We work with individuals and businesses to reduce exposure, manage risk, and navigate the VDP process with confidence.
Book a call: 902-468-5500
Email us: info@msweeney.com
Note: All measures described are effective as of October 1, 2025. This article is for general informational purposes only and does not constitute tax advice.