CRA provides clarification on Voluntary Disclosure Program modifications

This Insight was prepared with the assistance of Summer Student Brennan Gallant.

The Canada Revenue Agency (CRA) has provided clarifications on its Voluntary Disclosure Program (VDP) and addressed questions gathered from tax practitioners following the modifications announced on October 1, 2025. Our article released in November last year outlined the modifications made to the VDP, including creation of the “prompted application” classification, and its impact on available interest and penalty relief. The VDP allows taxpayers to voluntarily report tax omissions or errors in exchange for relief, including immunity from prosecution, partial forgiveness of interest and forgiveness of penalties. Applicants must meet certain criteria, including disclosing all known errors and omissions and payment of the estimated tax owing alongside their application.

These modifications gave rise to a variety of questions from tax practitioners around the country. Recently, the CRA provided answers to some of those questions.

The scope of a “complete” voluntary disclosure

Previously under the VDP a disclosure needed to be “complete,” meaning that all available information needed to accompany the taxpayer’s application. The amendments to the program now provide instead that applications regarding income tax need only include documentation for the most recent six years. Where the disclosure involves income or assets located outside of Canada, CRA expects documentation for the last 10 years, while GST/HST-related applications require documentation from the last four years.

This change had left some tax practitioners questioning whether to disclose omissions or errors in a VDP filing that extend beyond the prescribed documentation periods (4, 6 or 10 years).

The CRA has explained that these timeframes (4, 6 and 10 years) are merely minimum requirements for completeness when filing documentation and granting relief. However, applicants must still explain how long the non-compliance took place even if it extends beyond the minimum documentation standard.

The CRA has emphasized that the VDP is built on the expectation of good faith and that applicants will provide accurate and complete information to the best of their knowledge. Although it is at the applicant’s discretion to include additional years of non-compliance in their documentation, the CRA will rely on the minimum requirements so long as the disclosure is consistent and reasonable.

It is important to remember that CRA retains the power to conduct an audit and request information for additional years beyond the minimum requirement, and failure to comply could result in the application being denied as incomplete. Additionally, the CRA’s audit powers extend to years not included in the application and years not eligible for relief.

Taxpayer relief program

CRA also addressed a question regarding how it handles a joint VDP filed in conjunction with an application to the Taxpayer Relief Program (TPR).

The CRA emphasized that the VDP and TPR are separate and independent programs that occur at different stages of the assessment process. The VDP serves as a pre-assessment program, allowing taxpayers to apply for relief before a formal assessment has been issued. Conversely, the Taxpayer Relief Program applies following the issuance of a formal assessment.

Although a taxpayer is entitled to submit a joint application under both the VDP and the TPR, CRA confirmed that the applications will be treated separately. First, the VDP application will be assessed, and once an assessment is issued, the TPR application will be forwarded to the department responsible for handling relief requests.

Clarification on voluntary yet prompted voluntary disclosure

The creation of the “prompted disclosure” classification has resulted in some confusion. Specifically, practitioners have been confused about how a disclosure can be prompted yet still voluntary enough to qualify for the program.

The CRA has commented that a voluntary application is one made without an audit or investigation initiated regarding the issue being disclosed. In addition, the CRA has stated that an application is not voluntary when the CRA has undertaken meaningful and active actions to examine or address the non-compliance issue. However, certain types of actions by CRA would not rise to this level. For example, an automatically generated system overdue notice for a tax return would not cause an application to lose its “voluntary” status. Another example given was a notice to file a T1, T2, T3 or other type of return, which would not itself eliminate voluntariness, but rather cause a disclosure to be assessed as prompted.

Another issue is whether a taxpayer can make a valid disclosure if related to another person who is under audit for the same type of non-compliance as the taxpayer applying for the VDP. CRA has clarified that the connection between the applicant and the related person may put the voluntariness aspect at risk. However, the CRA also stated that generally only considers communications directed to the applicant in deciding if an application is prompted or unprompted.

Key takeaways

Tax practitioners should note that the CRA’s clarifications reinforce the importance of complete disclosure, even beyond the minimum documentation periods. The VDP remains a powerful tool for informed taxpayers and advisors in exposure mitigation but is not without its risks. The MLT Aikins Tax Dispute Resolution group is experienced in advising both taxpayers and their accountants on how best to navigate CRA’s administrative processes. For any questions about the VDP, feel free to reach out to a member of the team.

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