At JMH, we’re committed to keeping our clients ahead of key tax-compliance developments. One significant change to watch is the forthcoming overhaul of the CRA’s Voluntary Disclosures Program (VDP), effective October 1, 2025. These changes create both opportunities and responsibilities for taxpayers (individuals and businesses) seeking to correct past errors or omissions. Below we walk through the what, why and how—and how your business or personal tax situation may be impacted.
What is the VDP?
The VDP is an administrative relief program that allows eligible taxpayers and registrants to come forward to correct past non-compliance—in other words, to disclose errors or omissions in tax returns or other filings—on a voluntary basis, before enforcement (audit or investigation) is initiated. In return, relief from interest and penalties may be granted, and the matter will not be referred for criminal prosecution (provided the disclosure meets the conditions).
What’s changing effective October 1, 2025?
On September 10 2025 the CRA published the updated Information Circular IC00-1R7 (income tax) and GST/HST Memorandum 16-5-1 (applications received on or after Oct 1 2025).
1. Expanded eligibility
- Historically, if the CRA had already initiated an audit or investigation (or the taxpayer had received direct enforcement contact) the disclosure would not be considered ‘voluntary’, and thus not eligible. Under the new policy, the barrier is somewhat relaxed: while audits or investigations still disqualify an application, receiving a general education letter or broad CRA communication about a compliance issue no longer automatically disqualifies eligibility.
- In other words: if you’ve received broad “we think you may have issues” type correspondence (but no audit or direct enforcement action yet), you may still qualify for the VDP.
2. Two-tier relief structure
The new rules introduce a simplified relief framework:
- Unprompted disclosures (no specific CRA prompt or targeted notice) are eligible for “general relief”: 100 % of applicable penalties waived, and 75 % interest relief.
- Prompted disclosures (after the taxpayer received a specific CRA communication about non-compliance or CRA has third-party info) become eligible for “partial relief”: up to 100 % penalty relief, 25 % interest relief.
3. Simplified application and reduced documentation burden
- A new version of the VDP application form (Form RC199) will be released and must be used for applications received on or after October 1.
- Documentation requirements are more explicitly defined. For example:
- Foreign-sourced income/assets: most recent 10 years;
- Canadian-sourced income/assets: most recent 6 years;
- GST/HST-related disclosures: most recent 4 years.
- The approach reduces the ‘all years’ requirement in many cases, thereby reducing cost and complexity.
4. Broader tax-regime coverage
The revised policy explicitly extends to more tax regimes administered by the CRA: e.g., fuel charge under the Greenhouse Gas Pollution Pricing Act, luxury tax under the Select Luxury Items Tax Act, the under-used housing tax, digital services tax, etc.
Why these changes matter
For business owners, individuals with foreign assets or income, mobile employees, or even those who simply made honest mistakes, the new VDP presents a meaningful opportunity: to get past non-compliance issues resolved in a transparent and constructive way. With broader eligibility, stronger relief (especially on interest), and clearer processes, the VDP becomes a more accessible tool. At the same time, the CRA is signalling that it expects proactive compliance and that relief is not a “get out of jail free” card—it’s a remediation pathway.
Strategic considerations for taxpayers and businesses
- Act sooner rather than later: If you believe you may have unreported income, incorrect filings, foreign-asset disclosures, mis-remitted GST/HST, or other omissions, engaging early may allow you to benefit from the expanded relief.
- Check whether you’ve been ‘prompted’: Understanding whether your situation is an unprompted or prompted disclosure affects the amount of relief you may receive.
- Ensure completeness: The VDP requires disclosure of all relevant information for the applicable years, full payment or payment arrangement for tax owing, and a signed RC199 (or equivalent). Incomplete or vague applications risk rejection.
- Prioritise documentation: Even though the CRA has reduced the breadth of years required in some cases, you should still be prepared to provide detailed records for the years in question and be ready for potential additional years if asked.
- Seek professional advice: The new rules improve accessibility but navigating whether you qualify, how to structure your application, and what risks remain (e.g., audit, criminal referral) still remains complex.
- Consider the implications for mobile/employer structure: Companies with global mobility, employees with cross-border assignments, or foreign property may find the documentation and scope specifics are especially relevant in light of the new thresholds.
Final Word
The October 1, 2025 overhaul of the CRA’s VDP is a significant compliance milestone. It offers a more approachable path for rectifying past non-compliance, but it still requires careful planning, honesty, and timely action. At JMH, we stand ready to guide you through assessing eligibility, preparing the disclosure, analysing your tax-risk environment, and helping you position for the best possible outcome.
If you believe you have past filings or deductions that may warrant a VDP submission—or you simply want to check whether your existing state of compliance makes use of the new rules appropriate—please get in touch. Let’s ensure you’re aligned with the updated framework, and that your tax affairs are in order moving forward.
This blog was written using the assistance of ChatGPT.
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