Benefits of a Voluntary Disclosure (VDP) in Canada
The benefits of filing a Voluntary Disclosure (VDP) or Tax Amnesty application are:
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No prosecution
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No penalties
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Confidentiality
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Interest reduction
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CRA does not prosecute VDP applicants
There is no sinister "tax man" or "tax police" in dark glasses waiting to pounce on you and throw you in jail for tax evasion or not filing tax returns if you do a VDP applicaiton.
CRA does not prosecute VDP applicants. The purpose of the Canada tax amnesty program is to encourage Canadian taxpayers to voluntarily comply with their income tax obligations. Prosecution would be contrary to the goals of the VD program and contrary to the published guidelines (binding on CRA) that make it clear there will be no prosecution. The latest published statistics shows that for 2008-2009 CRA referred 164 income tax and GST/HST investigations to the Public Prosecution Service of Canada. During this same time period there were over 11,000 voluntary disclosures submitted. These prosecutions were for taxpayers who were caught evading taxes, or who were sent requests and demands to file tax returns and ignored the demands. The prosecutions are NOT as a result of submitted VDP applications.
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Conditions to be met for Canadian Voluntary Disclosure or Canadian Tax Amnesty
To qualify under the program, you must initiate the voluntary disclosure or Canada tax amnesty application. If CRA has begun audit or enforcement action, or has demanded that returns be filed, the disclosure is not considered to be voluntary and full penalties will be applied. A computer generated request for a return may not always disqualify you from benefiting from the program.
The disclosure must include enough details to allow all of the facts to be verified.
The taxpayer must pay the total amount of any taxes and interest owing at the time of disclosure, or make acceptable payment arrangements.
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Incomplete income tax Voluntary Disclosure
If the disclosure is incomplete, the disclosed information will be considered to be voluntary. However, the taxpayer will be subject to civil penalties or prosecution relating to any substantial undisclosed amounts. You are only required to make your reasonable best efforts to supply all necessary information
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Timing of Tax Voluntary Disclosure
A voluntary disclosure (tax amnesty application) is effective from the time the we contact CRA on your behalf, even if detailed submissions are not made at that time. Therefore, for example, a taxpayer who has not filed tax returns for several years need not have them ready when first contacting CRA. Normally 90 days are provided to submit all necessary information. Extensions of time are usually granted for valid reasons such as difficulty in compiling the necessary information. The initial contact will be considered to be the date of the voluntary disclosure. The rules for a no-names disclosure are slightly different
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A taxpayer who makes a voluntary disclosure or tax amnesty Canada application and voluntarily files unfiled returns will only be required to pay the tax owing on the reported income with interest. No late filing penalty will be charged.
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Where a taxpayer has failed to report income, including a failure to report foreign income including foreign pensions such as UK pensions or unreported offshore income or unreported online income (including unreported ebay income) and voluntarily reports it, only the tax owing on the unreported income plus interest on it will be charged. The same is true where improper expenses have been claimed.
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CRA allows us to approach them on your behalf without revealing your name to negotiate the terms of your voluntary disclosure. We have 60 days from the time we make the no-names disclosure to reveal your name. Once your identification is provided to them they will review their files to see if you qualify for the program. The no-names disclosure is sometimes helpful, and we use it in appropriate circumstances
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