Will I Be Penalized If I Use the CRA Voluntary Disclosure Program in Canada?
This answer covers Canadian federal tax law, which applies in every province.
Using the Voluntary Disclosures Program (VDP) can reduce or remove penalties and some interest, but you still pay the tax itself. If the application is accepted, the CRA may give penalty and interest relief, and the tax owing must be paid in full.
How much relief you get depends on whether your application is unprompted or prompted. Unprompted applications normally receive 100% relief of the applicable penalties and 75% relief of the applicable interest. Prompted applications normally receive 25% relief of the applicable interest and up to 100% relief of the applicable penalties. Eligible applicants are protected from prosecution for the disclosed information, and gross negligence penalties do not apply to it.
Relief is not automatic. The application must be voluntary and complete, and it must include payment or a request for a payment arrangement. Relief also follows a ten-calendar-year limit, so older years may get reduced or no relief. The CRA can still audit the information you provide, whether or not relief is granted. Whether your facts fit is worth confirming with a lawyer or accountant before you file.
Key takeaways
- An accepted VDP application can bring penalty and interest relief, but the tax itself must still be paid in full.
- Unprompted applications normally get 100% penalty relief and 75% interest relief, while prompted ones normally get 25% interest relief and up to 100% penalty relief.
- Eligible applicants are protected from prosecution for the disclosed information, and gross negligence penalties do not apply to it.
- The CRA can still audit what you disclose, so confirm your situation with a lawyer or accountant before filing.