Will I Be Penalized for Using the Voluntary Disclosure Program in Canada?

Coming forward to the CRA can feel risky, especially if you worry that admitting a mistake will lead to a bigger bill. The Voluntary Disclosures Program (VDP) exists partly to ease that worry by offering relief from some penalties and interest.

This article explains what the CRA may cancel or reduce, what you still owe, and what can limit your relief. Your own result depends on your facts, so it is worth confirming details with a lawyer or accountant.

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

What you will likely still pay

The VDP gives relief on penalties and interest, not on the tax itself. Tax owing must be paid. Even for an accepted application, the tax must still be paid in full.

Payment of the estimated tax owing, or a request for a payment arrangement, is a condition of a valid application. Approval of a payment arrangement is not guaranteed, and collections officials review each request.

How much relief the CRA normally gives

The CRA's current circular, IC00-1R7, applies to VDP applications received on or after October 1, 2025. Earlier applications fall under IC00-1R6.

The same percentages apply to GST/HST applications. As an exception, GST/HST wash transactions that qualify under Memorandum 16-3-1 can receive 100% relief of applicable penalties and interest, whether unprompted or prompted.

Eligible applicants are also protected from prosecution for the disclosed information, and gross negligence penalties do not apply to it.

Unprompted or prompted: why it matters

Your 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 contact identifying a specific error or setting a correction deadline, or follows third-party information about your non-compliance.

A CRA letter or notice 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.

• The application must be voluntary and complete, with all supporting documents.
• It must involve interest, penalties or both.
• It must include information at least one year past the filing due date.
• It must include payment of the estimated tax owing, or a request for a payment arrangement.

Situations the CRA lists as possibly eligible include not reporting or under-reporting income, not filing a return that is now a year late, and claiming ineligible expenses. Corporations can apply. Situations generally not eligible include applications that produce a refund or no tax or penalties owing, requests for relief on penalties or interest already assessed, and insolvency for the years involved.

What can limit or remove relief

• Relief 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.
• An audit or investigation already started against you or a related taxpayer means the disclosure is not voluntary.
• The CRA may audit any information in your application, and if it finds fraud or misrepresentation it may assess any year.
• The CRA may deny an application as incomplete if requested documents are not provided within a reasonable timeframe.

If the CRA denies relief, the decision letter gives the reason. It also states the application type, the relief level and the eligible tax years.

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. For GST/HST, supporting documents are required for the most recent four years. The CRA's June 2026 page says relief covers information going back up to 10 years from the disclosure date, and older information may get reduced relief. Confirm the current figures before filing.

Someone who got VDP relief must stay compliant. A later application may be considered if the circumstances were beyond their control or concern a different matter.

How the application and decision work

Form RC199 can be filed through My Account, My Business Account or Represent a Client, or by fax or mail. Use one submission method only, and know that applications can be submitted any time of year. Your application is made up of the following:

• The completed, signed RC199.
• All returns, forms and schedules needed to correct the non-compliance.
• Payment, or a request for a payment arrangement, for the estimated tax owing.

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 for VDP applications, so it is not possible to say how long a decision will take.

If a representative submits for you, both you and the representative must sign the application. If you disagree with a decision, you can ask in writing for a second administrative review, and judicial review in the Federal Court generally must be filed within 30 days of the CRA's notification.

What to do next

• Find out whether the CRA has contacted you about the issue, since that affects your relief level.
• Estimate the tax, penalties and interest so you know what to expect.
• Plan how you will pay the tax, or whether you need to request a payment arrangement.
• Gather records for the affected years.
• Get advice from a lawyer or accountant before filing.

If you cannot pay in full, you may ask for a payment arrangement on the application, but the CRA's approval is not guaranteed.

Frequently asked questions