CRA Voluntary Disclosures Program (VDP) 2026: New Rules, Penalty Relief and How to Apply

The short answer

The Canada Revenue Agency’s Voluntary Disclosures Program (VDP) changed significantly for applications received on or after October 1, 2025. The most important practical change is that CRA contact no longer automatically closes the door. The current program distinguishes between “unprompted” and “prompted” applications, and an application is only ruled out as involuntary where an audit or investigation has already been initiated in respect of the information being disclosed.

Under the current policy, an eligible unprompted application normally receives 100% relief from applicable penalties and 75% relief from applicable interest. An eligible prompted application normally receives 25% relief from applicable interest and up to 100% relief from applicable penalties. Where relief is granted, the disclosed matters will not be referred for criminal prosecution and gross negligence penalties will not apply to the information disclosed. The underlying tax remains payable.

The program can apply to a wide range of issues, including unreported income, unfiled returns, late or missing foreign-reporting forms such as T1134 and T1135, GST/HST errors, source deductions and non-resident withholding matters. It remains a discretionary program, however. CRA states that it is not required to grant relief on every application, and a disclosure filed before the facts are properly understood can create real risk.

What changed in the CRA Voluntary Disclosures Program?

The current VDP policy is set out in CRA Information Circular IC00-1R7 (September 10, 2025) for income tax and related matters, and in GST/HST Memorandum 16-5-1 (September 2025) for GST/HST and several other indirect taxes and charges. Both apply to applications received on or after October 1, 2025.

The new framework replaced the 2018 structure, which divided applications between a “General Program” and a “Limited Program.” Under that framework, CRA enforcement activity or awareness of it could prevent an application from being considered voluntary, and certain conduct or taxpayer profiles could push a file into the limited-relief stream. The current framework is simpler and materially broader in access. Relief now depends primarily on whether the application is unprompted or prompted:

• Unprompted application — general relief: normally 100% relief of applicable penalties and 75% relief of applicable interest, together with protection from criminal prosecution for the matters disclosed.
• Prompted application — partial relief: normally up to 100% relief of applicable penalties and 25% relief of applicable interest, together with protection from criminal prosecution for the matters disclosed.
• GST/HST wash transactions: under Memorandum 16-5-1, a qualifying wash transaction can receive 100% relief of applicable penalties and interest.

CRA also revised Form RC199 and set out clearer documentation periods, discussed below.

The old “door open / door closed” question has become a more nuanced one: if the application is still voluntary, which level of relief applies?

CRA contact does not always disqualify you

The words “prompted” and “voluntary” can sound contradictory. They are not.

Under IC00-1R7, an application is not voluntary if an audit or investigation has already been initiated against the taxpayer or a related taxpayer in respect of the information being disclosed. For VDP purposes, that audit or investigation is not limited to CRA activity; it can also include proceedings by law-enforcement agencies, securities commissions or other federally or provincially regulated authorities. That is the disqualifying line. Other CRA contact generally affects the level of relief rather than eligibility itself.

CRA’s policy describes an application as generally unprompted where there has been no verbal or written communication from CRA about an identified compliance issue related to the disclosure, or where the taxpayer has received only an education letter or notice offering general guidance and filing information.

An application is generally prompted where it follows verbal or written communication from CRA about an identified compliance issue (for example, a specific error or omission, or a deadline to correct one), or where CRA has already received information from third-party sources regarding the potential involvement of the taxpayer or a related taxpayer in tax non-compliance.

In practice, three outcomes are possible:

1. Unprompted — no relevant CRA contact, or only a general education letter.
2. Prompted — CRA has communicated about an identified compliance issue, or has already received relevant third-party information, but no audit or investigation has begun on the disclosed matter.
3. Not voluntary — an audit or investigation has already been initiated against the taxpayer or a related taxpayer in respect of the information being disclosed.

Voluntariness is assessed against the information being disclosed. An audit of one matter does not necessarily prevent a disclosure of a different, unrelated matter, although the relationship between the two needs careful review.

Unprompted versus prompted: why the difference matters

Consider a file with $40,000 of otherwise applicable interest. If the application qualifies as unprompted, 75% interest relief would leave $10,000 of that interest payable. If the same application is prompted, 25% interest relief would leave $30,000 payable. That $20,000 difference arises before considering the additional interest that continues to accrue while the file is being prepared.

The penalty side can matter as much or more. Unprompted applications normally receive 100% relief of applicable penalties. Prompted applications are eligible for up to 100% penalty relief, which preserves CRA discretion. For foreign-information-return files, where the penalty component can be the largest part of the exposure, that distinction deserves attention.

The lesson is not to rush an incomplete application. It is to investigate promptly once a problem is discovered, because the classification and available relief can change while a taxpayer waits.

The five eligibility conditions

CRA’s current guidance sets out five conditions that an application must meet.

1. The application must be voluntary

No audit or investigation can already have been initiated against the taxpayer or a related taxpayer in respect of the information being disclosed. As noted above, other CRA contact may still permit a prompted application.

2. The application must be complete

The taxpayer must disclose all known errors and omissions in its tax obligations, including any arm’s length and non-arm’s length transactions or circumstances relating to them, and must include the returns, forms and supporting documentation needed to correct the problem for the required periods. The taxpayer must also respond to CRA’s follow-up requests within the timeframes CRA sets.

Completeness is not a formality. CRA states that an application may be denied where the information provided is insufficient to support the disclosure, where requested information is not provided within the specified timeframe, or where CRA discovers other non-compliance that was not included in the application.

3. The error or omission must involve interest, penalties, or both

This point is often misunderstood. The current policy requires an error or omission with applicable interest charges, penalties, or both. It does not require that additional income tax be payable.

That matters for foreign-information-return cases. A late T1134 or T1135 can produce substantial penalties even where little or no additional Canadian income tax is owing, and the penalty exposure itself can satisfy this condition. Conversely, CRA’s policy states that applications relating to returns that result in a refund, or with no taxes or penalties owing, are generally not eligible.

4. At least one year or reporting period must be past due

The disclosure must include information that is at least one year, or one reporting period, past its filing due date. The VDP is not designed to function as an extension of the normal filing deadline, and a taxpayer should not deliberately wait for a current-year error to “age” into the program without first assessing the consequences of filing late outside it.

5. Payment or a payment-arrangement request must be included

Where tax is owing, the application must include payment of the estimated tax or a request for a payment arrangement. CRA’s approval of a payment arrangement is not guaranteed; requests are reviewed by CRA collections officials. The VDP can relieve penalties and part of the interest. It does not relieve the tax itself.

How many years have to be included?

The current program provides much clearer documentation expectations than the previous version. For income tax matters, supporting documentation is generally required for:

• the most recent six years where the errors or omissions relate to Canadian-sourced income or assets; and
• the most recent ten years where the errors or omissions relate to income or assets located outside Canada.

For GST/HST disclosures under Memorandum 16-5-1, supporting documentation is generally required for the most recent four years. A year or reporting period within those windows that contains no error or omission does not need to be included merely for continuity.

These are documentation expectations for the application package. They are not limitation periods on CRA’s assessment powers, and they are not a licence to leave an older history out of the narrative. IC00-1R7 still requires the taxpayer to disclose all known errors and omissions, and CRA may, at its discretion, request documentation for years beyond these timeframes. Where books and records do not exist, CRA expects taxpayers to make all reasonable efforts to provide estimates.

Relief is limited by the ten-year rule

For income tax matters, penalty and interest relief is granted under subsection 220(3.1) of the Income Tax Act, which allows the Minister to waive or cancel penalties and interest on or before the day that is ten calendar years after the end of the relevant taxation year (subject to the provision’s specific application rules). IC00-1R7 confirms that VDP relief is provided in line with this limitation period.

This is a separate question from what must be disclosed or documented. How long the non-compliance existed, which periods must be corrected in the package, and which periods CRA has statutory authority to relieve can produce three different answers, and the difference should be understood before filing.

Why T1134 and T1135 files are important VDP candidates

Foreign-reporting files are among the most consequential VDP matters because the reporting penalties can apply independently of any tax owing. CRA’s foreign-reporting regime includes, among others:

• T1134 — Information Return Relating to Controlled and Non-Controlled Foreign Affiliates;
• T1135 — Foreign Income Verification Statement;
• T106 — Information Return of Non-Arm’s Length Transactions with Non-Residents;
• T1141 — Information Return in Respect of Contributions to Non-Resident Trusts, Arrangements or Entities; and
• T1142 — Information Return in Respect of Distributions from and Indebtedness to a Non-Resident Trust.

CRA’s published foreign-reporting penalty table confirms that T1134 and T1135 can attract ordinary late-filing penalties and, where a failure to file is made knowingly or under circumstances amounting to gross negligence, considerably larger penalties, which can extend to a percentage of the cost of the foreign property or of the shares and debt of the foreign affiliate. CRA expressly lists failure to file certain information returns, such as Form T1135, as an example of a situation that may be eligible for the VDP. Eligibility is still assessed case by case; nothing about a foreign-reporting file makes acceptance automatic.

For T1134 in particular, the compliance exercise is often much more than filing a late form. A proper foreign-affiliate review may require:

• confirming whether an entity was a foreign affiliate or a controlled foreign affiliate in each year;
• reconstructing ownership percentages over time and identifying lower-tier affiliates;
• reviewing foreign financial statements and tax information;
• considering surplus accounts and foreign accrual property income (FAPI) where relevant;
• determining how many T1134 supplements are required; and
• ensuring that the VDP narrative, the tax returns and the information returns are factually consistent.

This is why foreign-reporting VDP work should not be treated as a clerical late-filing project, and why it overlaps closely with our ongoing T1134 foreign affiliate reporting and T106 reporting work. For a step-by-step treatment of late foreign-affiliate filings, see our detailed guide to missed T1134 filings and the VDP. Where penalties have already been assessed for a late T1135 and the question is whether CRA should cancel them, the analysis is different; our article on T1135 penalties and what CRA must consider before refusing relief addresses that taxpayer-relief route.

Practice experience at Lepore & Company

VDP work is a recurring part of our tax practice rather than an occasional filing. Lepore & Company typically prepares approximately 5 to 10 voluntary disclosure submissions per month involving a range of domestic and international issues. A significant part of that work involves complex foreign-reporting and cross-border matters, including T1134 foreign-affiliate filings, T1135 reporting, GST/HST non-compliance, non-resident and withholding-tax matters, unreported foreign income, and situations involving multiple years or entities.

That volume matters because VDP files are rarely identical. The technical issue may be foreign reporting, GST/HST, payroll, personal income tax, corporate income tax, or several of those at once. The more difficult work is usually determining the full perimeter of the non-compliance before the application is filed, not completing Form RC199.

GST/HST voluntary disclosures

The VDP is not limited to income tax. GST/HST Memorandum 16-5-1 applies to applications received on or after October 1, 2025 and covers GST/HST together with a number of other taxes and charges administered by CRA, including excise taxes and duties, the fuel charge, luxury tax and underused housing tax.

Common GST/HST disclosure situations include failure to register when required, failure to charge, collect or remit GST/HST, unreported taxable supplies, incorrectly claimed input tax credits, and GST/HST consequences discovered during an income tax clean-up. The memorandum also sets out circumstances that are generally not eligible, including an application that only seeks an increase in input tax credits without a corresponding increase in tax liability.

The documentation period for GST/HST is generally the most recent four years, and a qualifying wash transaction may receive 100% relief of applicable penalties and interest. Once a disclosure is accepted, ongoing compliance matters as much as the correction itself; our GST/HST return filing service supports registrants going forward.

GST/HST files also show why a full scope review matters: a business that failed to report cash revenue for income tax purposes may have a corresponding GST/HST exposure, and a disclosure that corrects only one side risks being incomplete.

Taxpayers who have already been contacted by CRA

Since October 2025, some taxpayers who have been contacted by CRA are no longer automatically shut out; the key is the nature of the contact, so the exact wording of the CRA communication matters. Before assuming that a VDP is no longer possible, review the actual letter, the account history and any other CRA contact. The answer may be that the file is still unprompted, that it is prompted but eligible for partial relief, or that it is no longer voluntary. That classification should be worked out before anything is filed, and quickly: a window that is open on one day may not be open weeks later.

Third-party information: the risk you cannot see

The current rules expressly provide that an application can be prompted where CRA has already received information from a third-party source regarding the potential involvement of the taxpayer or a related taxpayer in tax non-compliance. This is particularly relevant to international files.

Financial and ownership information now moves between financial institutions, tax administrations and other reporting parties in ways that did not exist a decade ago, and a taxpayer usually does not know what CRA has received. That does not mean every foreign-account disclosure is automatically prompted; the test is whether CRA has actually received relevant information about the specific taxpayer’s potential non-compliance. It does mean that “CRA has never written to me” is no longer, on its own, proof that an application is unprompted.

What does “complete” really mean?

The application form is not the disclosure. The real application is the complete factual and tax package.

Because CRA requires disclosure of all known errors and omissions, including arm’s length and non-arm’s length transactions or circumstances relating to the non-compliance, the scope of a project can expand materially once the review begins. A taxpayer who comes in because of a late T1135 may also have unreported foreign interest or dividends, a foreign corporation requiring T1134 reporting, a non-resident trust issue, foreign tax credit questions, missed Canadian returns during a period of uncertain residency, or unrelated GST/HST or business-income issues.

The professional review should identify these issues before the disclosure position is finalized. CRA may deny an application if it later learns of non-compliance that was omitted. The policy does not say that every inadvertent or immaterial gap is fatal, and each application is reviewed on its merits, but a deliberately partial disclosure is inconsistent with the purpose of the program and is a serious risk to the relief sought.

What if old records are missing?

Missing records are common, especially in international files where foreign banks keep limited histories or a foreign corporation has changed accountants. CRA’s policy acknowledges this: where books and records do not exist, taxpayers should make all reasonable efforts to provide estimates. That does not mean unsupported guessing. A defensible estimate should normally explain what records were requested and which were unavailable, what alternative sources were reviewed, the methodology used, material assumptions, the foreign-exchange approach where relevant, and why the result is reasonable. The credibility of the reconstruction is often as important as the number itself.

Can you make an anonymous VDP?

You cannot file an anonymous “no-names” application that secures a disclosure position, as older versions of the program allowed. However, CRA still offers anonymous pre-disclosure discussions. A taxpayer who is unsure whether to proceed can discuss their situation with a CRA official on an anonymous basis to gain insight into the process, the risks of remaining non-compliant and the relief potentially available.

The distinction is important. Anonymous pre-disclosure discussions remain available; an anonymous application that locks in an effective date does not. CRA describes these discussions as informal and non-binding, so they do not guarantee acceptance of a later application.

How do you apply?

Applications are made using Form RC199, Voluntary Disclosures Program (VDP) Application. For a multi-year income tax disclosure, the package generally includes:

• a completed and signed RC199;
• amended or outstanding returns and any required information returns, such as T1134 or T1135;
• schedules, calculations and supporting records for the required periods;
• a clear factual explanation of the non-compliance;
• the name of any individual (including a tax professional or promoter) who provided assistance or advice on the subject matter of the disclosure, which CRA requires to be included in the application form; and
• payment of the estimated tax owing, or a request for a payment arrangement.

Applications can currently be submitted electronically through My Account, My Business Account or Represent a Client, or by fax or mail to the Shawinigan National Verification and Collections Centre. CRA asks applicants to use one submission method only. CRA then sends an acknowledgement letter confirming the effective date of disclosure. Because that date can affect the relief available, keep clear evidence of what was submitted, when and how, and of CRA’s receipt.

What a good VDP submission explains

There is no magic wording. A strong submission lets the CRA reviewer understand what happened and how it was discovered, which obligations and periods are affected, why the application is unprompted or prompted, what corrective filings and records are included, how estimates were built, and how any tax owing will be paid. The tone should be factual: the strongest applications are organized, candid and internally consistent, not dramatic or defensive.

When should tax counsel be involved?

Most VDP files are compliance and tax-computation matters that an experienced tax professional can manage. Some files are different. Legal counsel should be considered where there is meaningful concern about intentional concealment or possible criminal exposure, serious misrepresentation, aggressive structures or promoter involvement, parallel regulatory or law-enforcement activity, or a significant question about whether disclosure itself could create broader risk.

Solicitor-client privilege belongs to the legal relationship. It does not automatically attach to an accountant’s working papers merely because a matter is sensitive. Where counsel needs accounting assistance to provide legal advice, the engagement structure and purpose of that work should be established properly from the outset. This is a risk-management decision, not a reason to route every routine disclosure through a law firm.

What happens if CRA rejects the VDP?

This is one of the main reasons the eligibility analysis should happen before filing.

IC00-1R7 states that CRA reserves the right to audit or verify any information provided in a VDP application, whether relief is granted or not. It also notes that where CRA finds fraud, or a misrepresentation attributable to neglect, carelessness or wilful default, an assessment may be issued at any time for the tax year to which it relates. A denial does not automatically trigger an audit, and it does not by itself reopen statute-barred years, but it is not a consequence-free “test application” either: the taxpayer has put the facts in front of CRA.

Where CRA denies relief, or grants less relief than expected, the taxpayer can request in writing that the Assistant Director of the Shawinigan National Verification and Collections Centre review and reconsider the decision. If the taxpayer believes CRA did not exercise its discretion fairly and reasonably, an application for judicial review may be made to the Federal Court. IC00-1R7 notes that the application must be filed within 30 days from the date CRA sent notification of the decision.

There is no notice-of-objection route for disputing a discretionary relief decision under subsection 220(3.1); subsection 165(1.2) of the Income Tax Act excludes such decisions from the objection process. That is different from disputing the underlying tax assessment, where the normal objection and appeal rights remain available. For more on disputing CRA decisions, see our CRA audit and appeals services.

VDP versus taxpayer relief: do not confuse them

The VDP and the taxpayer relief provisions serve different purposes. The VDP corrects previously undisclosed non-compliance and, if the application qualifies, may provide penalty relief, interest relief and protection from prosecution for the matters disclosed. Taxpayer relief generally asks CRA to cancel or waive penalties or interest that have already arisen, on grounds such as extraordinary circumstances, CRA error or delay, or inability to pay.

If penalties and interest have already been assessed and the taxpayer is simply asking CRA to cancel them, IC00-1R7 identifies that as a situation generally not eligible for VDP relief. Choosing the correct procedure at the start matters.

What is generally not eligible?

IC00-1R7 gives examples of situations where relief will generally not be available, including applications that:

• relate to returns resulting in a refund, or with no taxes or penalties owing;
• seek relief of penalties or interest that have already been assessed;
• seek to make or change an election;
• involve years affected by an insolvency event;
• relate to matters covered by an advance pricing arrangement with CRA or another tax administration; or
• relate to matters dependent on an agreement at the discretion of the Canadian competent authority under a tax treaty.

This list should be read carefully, because older commentary on the pre-October 2025 program is no longer a reliable guide. For example, under the former framework corporations with gross revenue above $250 million in at least two of their last five taxation years were generally processed under the Limited Program. That Limited Program no longer exists, and IC00-1R7 does not contain an equivalent revenue threshold. Similarly, the current circular does not say that every transfer-pricing matter is excluded; it identifies advance pricing arrangement and competent-authority-dependent matters, and notes that the VDP may request technical assistance from specialty areas such as the Transfer Pricing Review Committee where appropriate.

Can a taxpayer make a second VDP application?

The program is no longer best described by a strict once-only rule. IC00-1R7 states that CRA may consider a subsequent application from the same taxpayer where the circumstances are beyond the taxpayer’s control, or where the new application relates to a different matter than a previous application.

Completeness still matters. A taxpayer should not divide one known compliance problem into separate applications. But a prior VDP does not necessarily end the analysis where a genuinely different matter later comes to light.

Situations where a VDP review is worth considering

Common triggers include missing T1134, T1135 or T106 filings, unreported foreign or inherited accounts, non-resident withholding failures, omitted business or rental income, unfiled personal, corporate or trust returns, source-deduction failures, GST/HST registration or remittance issues, and cross-border structures where Canadian reporting was misunderstood.

The existence of an error does not automatically make the VDP the right procedure. The first step is to determine:

1. what is wrong, and how far back it goes;
2. whether CRA has contacted the taxpayer or already received relevant information;
3. whether an audit or investigation has begun on the matter;
4. the tax, interest and penalty exposure outside the VDP;
5. the likely classification and relief inside the VDP; and
6. whether another CRA procedure is more appropriate.

Frequently asked questions

What is the CRA Voluntary Disclosures Program?

The VDP is CRA’s discretionary program for taxpayers and registrants who come forward to correct past errors or omissions in their tax filings. If CRA grants relief, some or all of the applicable penalties and part of the applicable interest are relieved, and the disclosed matters are not referred for criminal prosecution. The program is sometimes loosely called a “CRA amnesty program,” but it is not an amnesty: tax remains payable, relief is discretionary, and CRA can verify what is disclosed.

How much relief does an unprompted application receive?

An eligible unprompted application normally receives 100% relief of applicable penalties and 75% relief of applicable interest, within the statutory limitation period for relief.

How much relief does a prompted application receive?

An eligible prompted application normally receives 25% relief of applicable interest and up to 100% relief of applicable penalties.

Can I still apply after CRA has contacted me?

Possibly. Contact about a specific compliance issue will generally make the application prompted rather than ineligible. If an audit or investigation has already been initiated in respect of the information being disclosed, the application is not voluntary.

Can a T1134 or T1135 disclosure qualify if no additional tax is owing?

Potentially, yes. The current criteria require an error or omission with applicable interest, penalties, or both, and foreign-information-return penalties can exist independently of additional income tax. CRA expressly lists failure to file certain information returns, such as T1135, as a potentially eligible situation. Acceptance is still not guaranteed.

How many years have to be included?

Generally the most recent six years for Canadian-sourced income or assets, ten years for income or assets located outside Canada, and four years for GST/HST. CRA may request additional years, and all known errors and omissions must still be disclosed.

Can I file an anonymous VDP?

Not in the former “no-names” sense. CRA does offer anonymous, informal and non-binding pre-disclosure discussions.

Can CRA audit me after a VDP?

CRA can audit or verify information provided in a VDP application whether relief is granted or not. Protection from prosecution applies only to the matters disclosed in an application for which relief is granted; it is not immunity from ordinary review or for undisclosed matters.

What if CRA denies my application?

You can request a second administrative review in writing. Judicial review in the Federal Court may also be available where CRA did not exercise its discretion fairly and reasonably; IC00-1R7 notes a 30-day deadline from the date CRA sent its decision.

Should I simply amend my returns instead?

Not without comparing the consequences. Amending quietly can leave the taxpayer exposed to ordinary penalties and interest, and in some cases broader consequences, on the corrected amounts. If the facts qualify, a properly prepared disclosure may provide significantly better relief.

How quickly should I act?

Quickly enough to avoid losing unprompted status unnecessarily, but not so quickly that the application is incomplete. The current program rewards unprompted applications more generously, and CRA can deny incomplete ones. The goal is a fast, disciplined scoping and reconstruction process.

Work with Lepore & Company

The VDP is often described as a form. In practice, the most important work happens before Form RC199 is submitted: understanding the full compliance history, identifying every affected tax obligation, determining whether the application is unprompted or prompted, reconstructing missing records, quantifying the exposure, and making sure the corrective returns and the disclosure narrative tell the same factual story.

Lepore & Company regularly handles voluntary disclosures involving domestic and international tax matters, foreign-reporting forms such as T1134 and T1135, GST/HST, non-resident and cross-border issues, and multi-year compliance failures. If you have discovered an unreported account, a late foreign-information return, a GST/HST problem or another historical tax issue, an early VDP review can determine whether the current program is available and what relief may realistically be expected before any corrective filings are made. Learn more about our voluntary disclosure services, or contact us to arrange a confidential review.

Update note

This article reflects CRA policy and published guidance available as of September 24, 2026, including Information Circular IC00-1R7 and GST/HST Memorandum 16-5-1, both applicable to applications received on or after October 1, 2025. The VDP is an administrative and discretionary program, and CRA guidance can change. Current policy should be re-checked before an application is filed.

Disclaimer

This article provides general information only and does not constitute legal, tax or accounting advice. VDP eligibility and relief are discretionary and fact-specific, and the outcome can depend on CRA contact, third-party information, audit or investigation activity, the completeness of the disclosure, the tax type, available records and the taxpayer’s compliance history. No particular result is guaranteed. Please obtain professional advice before filing a voluntary disclosure or amended returns.