Is a Voluntary Disclosure Valid if I Only Make It Because I Fear an Audit in Canada?
This answer covers Canadian federal tax law, which applies in every province.
It can be, but not once an audit or investigation has been initiated for the information you want to disclose. This includes investigations by law enforcement, securities commissions or other federal or provincial regulators, not just the CRA, and it covers related taxpayers.
Being worried about an audit is different from being contacted. An application is generally unprompted if the CRA has not communicated with you about the issue, or if the only contact was a general education letter. It is generally prompted if it follows CRA communication identifying a specific error or setting a correction deadline, or follows third-party information about your non-compliance. A CRA letter about a specific issue does not by itself end eligibility; the application is treated as prompted if you are not under audit or investigation.
Prompted applications normally receive 25% interest relief rather than 75%. The CRA can still audit the information you disclose. If you are unsure, you can hold anonymous, non-binding preliminary discussions with the CRA, which are not an application. A lawyer can help confirm where you stand.
Key takeaways
- A disclosure is not voluntary if an audit or investigation has been initiated against you or a related taxpayer for the disclosed information.
- An application is generally unprompted if the CRA has not communicated with you about the issue, or if the only contact was a general education letter.
- A CRA letter about a specific issue does not by itself end eligibility, and the application is treated as prompted if you are not under audit or investigation.
- Anonymous preliminary discussions with the CRA are informal and non-binding, and they are not an application.