CRA Voluntary Disclosure Program
For Canadian taxpayers who filed their taxes inaccurately or did not file at all during past years, the CRA has a program called VDP or Voluntary Disclosure Program to enable taxpayers to correct their tax returns filed in past years or to file for tax years where they have not filed at all.
From March 1, 2018, the CRA introduced a new Voluntary Disclosure Program. Instead of having one program for all voluntary tax disclosures, the new VDP will have a two tracks program for voluntary tax disclosures. The two tracks are a Limited Relief stream and a General stream. The Limited Relief stream is reserved for intentional tax non-compliance as well as for corporations with gross revenue exceeding $250 million dollars. The General Program is reserved for everyone else.
Compared to the previous program, and the new general program, there will be significantly diminished tax relief for Canadian taxpayers under the Limited VDP stream. There will only be relief from criminal tax evasion charges and gross negligence penalties. There will be no interest relief and no other penalty relief other than gross negligence penalty relief.
Under the old program and the new general voluntary disclosure program, taxpayers who accept voluntary disclosure tax relief can still file Notices of Objection and appeal to the Tax Court of Canada. Whereas taxpayers who benefit from tax relief under the Limited Program have to waive their rights to appeal. This includes the right to appeal within the CRA’s Appeals Division by way of a Notice of Objection, as well any appeal rights to the Tax Court of Canada. The scope of the waiver includes tax matters disclosed in the VDP or any related assessments, but it does not include calculation errors, issues of characterization, or issues other than those tax issues disclosed under the VDP.
Therefore, taxpayers will always prefer to be accepted under the General stream rather than the Limited stream. The CRA will consider four factors in deciding if the taxpayer can only be accepted under the Limited VD Program:
- any efforts made to avoid detection
- the dollar amounts involved
- the number of years of non-compliance
- the sophistication of the taxpayer
The General Program is available to Canadian taxpayers who do not fall within the Limited Program. It will be similar to the old VDP in that interest relief will be available for tax owing from the past four to ten years disclosed. However, interest relief under the new program will be half of total interest owed whereas interest relief under the old program was not fixed but was typically 4% of the percentage of interest assessed.
In addition to the two tracks program, the new Voluntary Disclosure system also replaces the No-Name disclosure with Pre-disclosure discussions. Taxpayers can no longer receive binding acceptance into the VDP through anonymous discussions. Any pre-disclosure will be done through CRA’s general enquiry line. There will be little benefit for taxpayers to participate in the Pre-Disclosure Discussion because CRA’s general enquiry line is not equipped to deal with VD discussions effectively.
Voluntary Disclosure Program Scope
Eligibility for the Voluntary Disclosure Program includes disclosures for import duties, GST/HST, excise taxes, income taxes, and source deductions.
Voluntary Disclosure Program Eligibility Criteria
Starting March 1, 2018, the new Voluntary Disclosure Program sets out five conditions of eligibility for a voluntary disclosure to be accepted:
- Voluntary: the CRA must have no knowledge about the taxpayer’s tax issue being disclosed.
- Complete: the taxpayer must reveal tax information for all tax years in which the tax filings were inaccurate or missing.
- Tax Owing: the taxpayer must owe tax to the CRA due to inaccurate or missing tax filings. VDP does not apply to situations where the taxpayer is owed tax refunds.
- One Year Past Due: the taxpayer can only disclose information for tax years that is at least one year past the filing due date unless part of a broader disclosure for older years.
- Tax Owing Paid Up Front: a new requirement is that the taxpayer must come up with their estimate of tax owing and pay that tax liability up front.
However, VDP agents have discretion in deciding whether the taxpayer is accepted into the VDP at all. Our top Canadian tax lawyers have the experience and expertise to provide our clients with detailed submissions to the VDP to ensure that all the tests are met to the satisfaction of the CRA..
Tax Tips – New Voluntary Disclosure Program
Our top Toronto tax lawyers will advise you on what to expect from your interactions with the CRA Voluntary Disclosure Program. Please feel free to contact us and book an initial consultation appointment and one of our experienced Canadian tax lawyers will advise you whether you qualify to be a part of the Voluntary Disclosure Program at all and into which program you will likely be accepted.
Our top Canadian tax law firm serves employees, independent contractors, and businesses. Initial e-mail or phone response is free. All consultations are completely confidential whether you finally choose to retain us or not.
"These articles provide information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."