Interest Relief in a Voluntary Disclosure: What the CRA Cancels in Canada

You have found a mistake or a gap in your tax filings, such as unreported income or a return you never filed. Now you want to know how much interest you will owe and whether any of it can be cancelled if you come forward.

The CRA's Voluntary Disclosures Program (VDP) is the usual route for this. This article explains what the program does with interest, what changed for recent applications, and what it does not cover.

This article covers Canadian federal tax law, which applies in every province.

What the VDP can and cannot cancel

The VDP lets you come forward to correct errors or omissions. If your application is accepted, the CRA may give penalty and interest relief and will not refer the disclosed matter for criminal prosecution.

The relief does not extend to the tax. The CRA describes the program as providing relief on penalties and interest, not on the tax itself, so the tax owing must be paid.

Situations the CRA lists as possibly eligible include not reporting or under-reporting income, not filing a return that is now a year late, not reporting foreign income taxable in Canada, and not remitting employee source deductions such as CPP and EI. Corporations can apply too. This article focuses on how much of the interest can be relieved. Your accountant or lawyer can help you estimate the interest for your own years.

Unprompted versus prompted: how much interest is relieved

For applications received on or after October 1, 2025, the CRA's circular is IC00-1R7. Earlier applications fall under IC00-1R6. The older labels of general and limited relief have been replaced by unprompted and prompted.

These are the normal levels, not a promise. The decision letter states your application type, the relief level and the eligible tax years.

Are you unprompted or prompted?

An application is generally unprompted if the CRA has not communicated with you about the compliance issue, or if the only contact was a general education letter.

It is generally prompted if it follows a CRA communication that identifies a specific error or sets a correction deadline, or follows third-party information about your non-compliance. An education letter alone does not make it prompted.

A CRA letter about a specific issue does not by itself end your eligibility. The CRA treats the application as prompted, with partial relief, if you are not under audit or investigation.

Situations where interest relief is reduced or unavailable

• The disclosure is not voluntary if an audit or investigation has been started against you or a related taxpayer for the disclosed information, including by law enforcement, securities commissions or other regulators.
• Relief is limited by the ten-calendar-year window in subsection 220(3.1) of the Income Tax Act, so older years may get reduced or no relief.
• Applications that produce a refund or no tax or penalties owing, and requests for relief on penalties or interest already assessed, are generally not eligible.
• The application must include payment of the estimated tax owing or a request for a payment arrangement, and approval of an arrangement is not guaranteed.

For GST/HST, the relief levels match income tax. Unprompted gets 75% interest relief and prompted gets 25%. GST/HST wash transactions that qualify under Memorandum 16-3-1 can receive 100% relief of penalties and interest, whether unprompted or prompted.

What to do next

• Check whether the CRA has contacted you about this issue, and keep any letters.
• Confirm that no audit or investigation has started on the same information.
• Gather records for the affected years and work out the estimated tax owing.
• Decide how you will pay, or whether you will ask for a payment arrangement.
• Speak with a lawyer or accountant before you file, because the application type drives the interest relief.

If you are unsure, you can hold an informal, non-binding discussion with the CRA on an anonymous basis. That discussion is not an application, and relief requires a signed Form RC199 with full documents and payment.

A complete package has the signed Form RC199, all returns, forms and schedules needed to correct the non-compliance, and payment or a request for a payment arrangement for the estimated tax owing. The VDP says it will consider fully completed applications only. Use one submission method only; applications can be submitted any time of year.

Income tax applications must include supporting documents for the affected years. Records generally cover the most recent six years, or ten years for assets or income located outside Canada, and years with no errors or omissions need not be included. If a representative submits for you, both you and the representative must sign the application.

After receiving your application, the CRA sends an acknowledgement letter with the effective date of disclosure, and relief runs up to that date if you qualify. The CRA does not publish a processing time. It may deny an application as incomplete if requested information or documents are not provided within a reasonable timeframe.

Frequently asked questions