Understanding the new and improved voluntary disclosure program

Introduction

On September 10th, 2025, the CRA announced upcoming changes for the Voluntary Disclosure Program (VDP). These changes are designed to help more taxpayers access the program and make the program easier to navigate. The changes will be effective October 1st, 2025. Applications received before October 1st, 2025, will be processed under the old regime. 

Background and facts 

The VDP has been a longstanding program aimed at providing taxpayers with a way to disclose tax errors and omissions without fear of prosecution. The program also allows taxpayers to apply for a reduction of interest and penalties the error or omission would have attracted if it had been discovered by the CRA. This relief could be granted for up to 10 years back from the date of application. 

Prior to the changes, the program had two streams; general and limited. The general stream was for applications with less egregious errors while the limited stream was for applications where the error or omission was intentional or was committed by a large corporation. Applications also needed to be entirely voluntary. If the CRA had provided the taxpayer with any communication on the issue or if a third party had disclosed the error to the CRA, the application would not be accepted. 

The CRA has acknowledged that the program has been fairly restrictive, and the upcoming changes are being made in an effort to allow more taxpayers to qualify. 

Key changes for income tax 

Removal of the general and limited programs 

The general stream offered full penalty and partial interest relief for inadvertent errors, the limited stream offered limited penalty relief and no prosecution. These streams will no longer be active. 

For reference, the previous programs had two main tracks: 

• General program: This track was for disclosures without intentional conduct. Taxpayers accepted into this program received penalty relief and partial interest relief. Specifically, 50% of the applicable interest for years preceding the three most recent years of returns was relieved, while full interest charges were assessed for the three most recent years. Importantly, taxpayers would not be referred for criminal prosecution. 

• Limited program: This track was for disclosures involving an element of intentional conduct. Under this program, taxpayers would not be referred for criminal prosecution and would not be charged gross negligence penalties. However, other penalties might still apply, and no interest relief was provided. 

Introduction of the prompted and unprompted application  

A Prompted Application is one that is submitted after there has been verbal or written communication with the CRA regarding the identification of an error. This error may or may not have a deadline for compliance. A Prompted application can also be made where a third party has already made the CRA aware of a potential error or omission.  

An Unprompted Application is where there has either been no communication or where only an education letter or general guidance has been provided. 

Comparison 

Introduction of new relief procedures 

Relief will be granted based upon whether the application was prompted or unprompted. Unprompted applications will generally be eligible for relief of 75% of the applicable interest and 100% of the penalties. Prompted applications will generally be eligible for relief of 25% of the interest and up to 100% of the penalties. 

Introduction of a new application simplified form  

This new form will be available October 1st, 2025, and will allow for electronic applications. While there are no changes to the types of documents required, the number of years required has been clarified, Canadian-source errors or omissions will generally only require support for the most recent 6 years, and foreign-sourced errors or omissions will generally need to provide 10 years of support. Where there are years without an issue, no support is required. The program will still allow the CRA to ask for more information if deemed necessary. 

Key similarities 

A VDP application must still meet the following basic requirements in order to be accepted: 

• Must relate to tax years that are at least one year past the due date,  

• Be a complete disclosure with all relevant information,  

• Would otherwise attract interest and/or penalties, and,  

• Be accompanied with payment or request for a payment plan.  

The new VDP program, consistent with the old program, does not provide relief for interest and penalties already assessed and cannot be used to make or alter an election. 

Taxpayers under audit, investigation or with egregious errors or omissions will still not be eligible for this program. 

Key changes for indirect tax (GST/HST)

Summary of the historic categories 

It covered GST/HST, excise tax, excise duty, softwood lumber products export charge, and air travellers security charge. A key characteristic of this program was its categorization of disclosures into three distinct types, each offering varying levels of relief: 

• Category 1 (Wash transactions): This category was specifically designed for GST/HST wash transactions. These are situations where a taxpayer failed to collect or remit GST/HST, but the recipient of the supply would have been entitled to an input tax credit for the same amount. In such cases, the CRA provided full relief from penalties and interest.   

• Category 2 (General program): This program was for disclosures involving non-compliance or errors that did not include gross negligence or deliberate tax avoidance. Examples included reasonable errors, failure to file information returns, or over-claimed rebates. Under this category, taxpayers could receive full relief from penalties and interest and would not be referred for criminal prosecution.   

• Category 3 (Limited program): This category was for more serious cases involving an element of intentional conduct, such as gross negligence, fraud, repeated non-compliance, large amounts of tax owing, a history of non-compliance, or sophisticated tax schemes. While penalties were relieved under this program, interest relief was not provided, and there was a possibility of referral for criminal prosecution. 

Eligibility for the old GST/HST VDP required the application to be voluntary (meaning no audit or investigation had been initiated), complete (providing all relevant information and supporting documents), and accompanied by payment or a request for a payment arrangement for the estimated tax owing. 

GST/HST specific changes 

1 For errors or omissions related to GST/HST, support for the most recent 4 years will need to be provided. Wash transactions will generally receive 100% relief on penalties and interest where the transaction would be eligible for a reduction under GST/HST Memorandum 16-3-1. 

Expanded scope of taxes covered 

One of the most significant changes in the new VDP is its expanded applicability. Beyond GST/HST and income tax, the program now explicitly covers disclosures related to a wider array of taxes and charges, reflecting the evolving Canadian tax landscape. These include: 

• Excise taxes and duties 

• Fuel charge under the Greenhouse Gas Pollution Pricing Act 

• Luxury tax under the Select Luxury Items Tax Act 

• Underused housing tax under the Underused Housing Tax Act 

• Digital services tax under the Digital Services Tax Act 

• Tax under the Global Minimum Tax Act 

• Air Travellers Security Charge 

• Softwood Lumber Products Export Charge 

Practical implications 

The expansion of this program will allow significantly more taxpayers to participate and correct errors in prior filings. The creation of the Prompted application gives taxpayers the chance to resolve errors that may have been identified already by the CRA while still applying for a significant reduction in penalties and interest. As applications made prior to October 1, 2025, will be assessed under the old program, there is incentive to defer applications until the new program has taken effect 

Conclusion 

An overall simpler application process and less strict eligibility requirements is a favourable change to this program. The CRA has stated that these changes are to make the process easier for taxpayers and the updates do appear to meet that objective and will make the correction of prior errors easier for everyone involved. 

You can read the full announcement here.