Voluntary Disclosures Program

What is the Voluntary Disclosures Program (VDP)?

The VDP is a program administered by the Canada Revenue Agency (CRA) that allows taxpayers to correct inaccuracies or report previously unfiled tax information without facing penalties or prosecution. If accepted under the program, the CRA may also provide partial interest relief on amounts owed.

For a disclosure to qualify under the VDP, it must meet the following conditions:

• Voluntary Submission – The disclosure must be made before the CRA initiates an audit or investigation. If the CRA has already contacted you regarding the issue, you are no longer eligible.
• Complete Information – All relevant details for the period in question must be disclosed accurately and fully.
• Potential Penalty – The disclosed issue must be one where penalties would normally apply. If no taxes are owed, the program is not applicable.
• Past Due for at Least One Year – The disclosure must relate to a tax return that is overdue by more than one year.

Should You Apply?

While the VDP appears to be an opportunity to correct tax errors without severe consequences, it is important to understand the details before proceeding. The CRA states that accepted disclosures will not result in penalties or prosecution, but acceptance is not guaranteed. Each submission is reviewed individually, and the CRA has the discretion to grant full, partial, or no relief.

The decision to charge interest or penalties is made on a case-by-case basis by the CRA agent handling the disclosure. If relief is denied or only partially granted, the CRA provides an explanation of the decision.

Can the Information Provided Be Used Against You?

A common concern is whether the CRA can use the information disclosed under a denied VDP submission. The answer is yes. If the disclosure is not accepted, the CRA may:

• Refer the disclosed information to other departments within the CRA.
• Use the information to reassess previous tax filings.
• Apply penalties and interest based on the disclosed information.
• Initiate investigations or legal actions if deemed necessary.

Consider Professional Advice

Before submitting a disclosure, it is recommended to seek professional assistance to understand the risks and benefits of applying under the VDP. Proper guidance can help determine the best course of action and improve the chances of a favorable outcome.