Limited vs Partial VDP Relief in Canada: What Changed and Why

If someone told you that you may qualify for "limited" or "partial" relief under the CRA's Voluntary Disclosures Program (VDP), you are probably trying to work out how much of your penalties and interest could be cancelled. The answer depends largely on whether you came forward before the CRA communicated with you about the issue or received third-party information about your non-compliance, or only after that happened.

The VDP rules were overhauled recently, so older terms can be confusing. This article explains the current relief levels, what pushes an application into each one, and what does not change no matter which level applies.

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

Why you may hear both "limited" and "partial"

The current VDP circular, IC00-1R7, applies to applications received on or after October 1, 2025, while earlier applications fall under the older circular, IC00-1R6. The older framework used labels such as general and limited relief. The current framework uses the terms unprompted and prompted instead.

So if an adviser, a letter or an older article used the word "limited", it may refer to the earlier rules. For a current application, the label that matters is partial relief, which is what a prompted application normally receives. If you are unsure which circular covers your file, a lawyer or accountant can confirm it from your application date.

The two relief levels side by side

The CRA describes relief in terms of the penalties and interest that apply to your situation. Here is how the two levels normally compare for income tax.

For GST/HST, the relief matches income tax: unprompted gets 75% interest relief and 100% penalty relief, and prompted gets 25% interest relief and up to 100% penalty relief. One exception is GST/HST wash transactions that qualify under Memorandum 16-3-1, which can receive 100% relief of applicable penalties and interest in either an unprompted or a prompted application.

What makes an application 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.

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

• No contact from the CRA about the issue: generally unprompted.
• Only a general education letter: still generally unprompted.
• A CRA letter naming a specific error or setting a correction deadline: generally prompted.
• Third-party information about your non-compliance: generally prompted.

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

What stays the same at either level

Neither level reduces the tax itself. The CRA says the VDP provides relief on penalties and interest, not on the tax, so tax owing must be paid. Eligible applicants are also protected from prosecution for the disclosed information, and gross negligence penalties do not apply to that information.

Some limits apply to both levels. A disclosure is not voluntary if an audit or investigation has already been initiated against you or a related taxpayer for the disclosed information, including investigations by law enforcement, securities commissions or other regulators. Relief also follows the ten-calendar-year limit in subsection 220(3.1) of the Income Tax Act, so older years may get reduced or no relief. The CRA can still audit what you disclose, and if it finds fraud or misrepresentation it may assess any year.

What to do next

• Gather every CRA letter, notice or phone note about the issue, with dates, so you can show whether the CRA contacted you first.
• Check whether any audit or investigation has started, since that affects whether the disclosure is voluntary.
• Confirm when your application would be received, because that decides which circular applies.
• Read the decision letter carefully once it arrives: it states whether the application was treated as unprompted or prompted, the relief level and the eligible tax years.
• If you disagree with the decision, you can ask in writing for a second administrative review before considering judicial review.

Because the line between unprompted and prompted turns on the facts of your contact with the CRA, it is worth having a lawyer or accountant review your timeline before you file.

Frequently asked questions