Newly proposed changes of significance to Canada Revenue Agency’s (“CRA”) Voluntary Disclosures Program (“VDP”) soon coming into effect

September 29, 2025

Overview

On September 10, 2025, the CRA released a new version of its VDP Information Circular, IC00-1R7[1], along with the new GST/HST Memorandum 16-5-1[2] (collectively referred to as the “new Programs”). The updated policies will apply to disclosures received on or after October 1, 2025, replacing the current frameworks under Circular IC00-1R6[3] and Memorandum 16-5[4] (collectively referred to as the “former Program”), which have governed disclosures since March 1, 2018.

The former Program’s version, which was adopted by the CRA in late 2017 and has been in effect since March of 2018, contained very strict positions, narrowed interpretations and, at times, undefined/unclear guidelines, which created significant challenges for applicants (particularly in cases where many years had to be included in the VDP application while the amounts at issue were relatively modest). These challenges prompted the CRA to modernize this administrative relief program to make it more effective, accessible and streamlined.

Key Changes Under the New Program

Expanded Eligibility Under Unprompted and Prompted Disclosures

One of the most significant amendments proposed under the new Program is the elimination of the “General” and “Limited” Program tracks[5]. Applications received on or after October 1, 2025, will now be considered either unprompted and be granted general relief, or prompted and be granted partial relief.

While unprompted applications essentially apply to situations where there has been no communication from the CRA regarding the specific compliance issue disclosed, or when they follow an education letter or general notice offering broad guidance on a particular topic, prompted applications apply where the CRA has already contacted the taxpayer about a specific issue, or where it has already received information from third-party sources about a taxpayer’s tax non-compliance.

The introduction of the unprompted versus prompted disclosures represents a significant change, as under the former Program, most cases in which an application would have been considered “prompted” were either excluded or, at best, confined to the Limited Program (which offered only gross negligence penalty relief and no interest relief whatsoever). Under the new Program, prompted applications shall remain eligible, with the possibility of partial penalty relief and reduced interest relief.

That said it is important to note that to be eligible for the new VDP, an application will still need to be “voluntary”, meaning that the CRA will continue to deny eligibility to the new program to taxpayers who are applying to the VDP while being:

Under audit/investigation by the CRA or other authoritative bodies (law enforcement agency, securities commission, or any other federally or provincially regulated authority, etc.), or
Determined to be egregiously non-compliant.

Furthermore, as part of the eligibility criteria, the CRA would now, under the new Program, accept applications involving errors or omissions that would not result in penalties but would only be subject to interest charges.

Additionally, the new Program lowers the threshold of eligibility for a second application under the VDP. Under the former program taxpayers needed to demonstrate to the CRA that the circumstances leading to their second application request were beyond their control AND that such second application was related to a different matter than the initial submission, whereas the new program would potentially allow a taxpayer to apply a second time for the VDP if either one of the above conditions were to be met.

Another welcome change in the new Program is the removal of the restriction on large corporations to be granted, upon application to the VDP, any relief other than the gross negligence penalty relief. Under the former VDP policies, corporations with gross revenues exceeding $250 million in at least two of their last five taxation years, together with their related entities, were typically confined to only be eligible for the “Limited” Program (i.e. providing only a potential gross negligence penalty relief). This specification no longer appears in Circular IC00-1R7 and Memorandum 16-5-1, meaning large corporations are now, under the new Program, on the same level playing field as other taxpayers.

Broader Scope of Relief with the New Relief Framework

The new Program also introduces a new relief framework. Under the former Program, the CRA provided full penalty relief and partial interest relief under the “General Program”. However, the “Limited Program” offered no interest relief at all, while penalties continued to apply, except for gross negligence penalties. In both cases, taxpayers were protected against criminal prosecution.

For applications received on or after October 1, 2025, a simplified relief framework now provides that:

Unprompted applications – normally eligible for general relief, with 75% relief from applicable interest and 100% relief from applicable penalties.

Prompted applications – normally eligible for partial relief, with 25% relief from applicable interest and up to 100% relief from applicable penalties.

This new framework provides taxpayers and practitioners not only with clearer expectations, but also with broader relief compared to the former “General” and “Limited” Program levels discussed above.

Clearer Documentation and Look-Back Periods

Circular IC00-1R7 also provides clearer guidance on documentation requirements and look-back periods. Under the new Program, applicants must include supporting information for the most recent six years (or ten years where the errors or omissions involve foreign assets or income). Taxpayers are also not required to include years in which there were no errors or omissions, although the CRA reserves the discretion to request additional periods if necessary.

Simplified Application Process

As part of its modernization effort, the CRA has announced that it would issue an updated version of Form RC199, which will be released on October 1, 2025. The updated form is intended to be simpler and easier to use and will be required for all disclosures starting October 1, 2025. It should also be noted that filing of the updated version Form RC199 will become mandatory for VDP applicants to be eligible for the new Program.

GST/HST and Other Indirect Taxes

While the prior Memorandum 16-5 already covered GST/HST, excise taxes under the Excise Tax Act, excise duties under the Excise Act, 2001, and certain federal charges, the new version expressly extends coverage to additional legislation. These include several provisions of the following legislation:

Fuel charge under Part I of the Greenhouse Gas Pollution Pricing Act;
Luxury tax under the Select Luxury Items Tax Act;
Underused housing tax under the Underused Housing Tax Act;
Digital services tax under the Digital Services Tax Act; and
Tax under the Global Minimum Tax Act.

Charges under the Air Travellers Security Charge Act and the Softwood Lumber Products Export Charge Act of 2006, also remain covered under the new proposed iteration of the CRA’s VDP.

Consistent with Circular IC00-1R7, the principles regarding unprompted and prompted disclosures, the new relief framework, and the clarified look-back periods are reflected in the GST/HST context through Memorandum 16-5-1.

In particular, Memorandum 16-5-1 eliminates the former VDP categories (i.e. “General” and “Limited” Program tracks) and replaces them with the same relieving streams as explained above for new IC00- 1R7. As it pertains to “wash transactions”, which under the former program had to be included in a separate VDP application, such transactions may now be included in either an unprompted or a prompted voluntary disclosure submission. This type of application would receive 100% relief from both penalties and interest, provided the transaction qualifies under the long-standing policy contained in Memorandum 16-3-1, which remains unchanged.

As for the look-back requirements, for applications received on or after October 1, 2025, applicants will be required to provide supporting documentation only for the most recent four years of GST/HST and related filings. This differs from the former Program, where Category 3 disclosures were required to cover all years in question. The four-year requirement is expected to reduce the compliance burden and provide greater certainty for registrants.

Conclusion and key takeaways

CRA’s VDP’s mission has always been (historically) to encourage taxpayers (via penalty relief, partial interest relief, and protection from criminal prosecution) to come forward voluntarily to correct past errors or omissions in their tax affairs.

The release of the updated Circular IC00-1R7 and Memorandum 16-5-1 marks an important development in the CRA’s Voluntary Disclosures Program. By expanding eligibility, restructuring the relief framework, clarifying look-back requirements, and simplifying the application process, the CRA seeks to improve the accessibility and transparency of the Program. For taxpayers considering voluntary disclosure, the changes effective October 1, 2025, create a valuable opportunity to come forward under clearer and more predictable rules.

While the new policies set out the federal framework, it is important to keep in mind that certain provinces administer their own voluntary disclosure programs with distinct conditions and relief parameters. Although these regimes are generally harmonized in principle with Ottawa’s, differences might remain in eligibility and scope of relief. Taxpayers and advisors should remain vigilant and consider both federal and provincial frameworks when planning a disclosure strategy.

Contact Our Team of Tax Experts

If have you experienced tax non-compliance issues and would like to learn more about the Canada Revenue Agency’s Voluntary Disclosure Program and potentially apply to obtain relief from interest and/or penalties, please reach out to Danny Guérin or another member of Andersen Inc. to assist you.

[1] IC00-1R7 Voluntary Disclosures Program: https://www.canada.ca/en/revenue-agency/services/forms- publications/publications/ic00-1.html

[2] GST/HST Memorandum 16-5-1: https://www.canada.ca/en/revenue-agency/services/forms- publications/publications/16-5-1/voluntary-disclosures-program.html

[3] IC00-1R6 – Voluntary Disclosures Program: https://www.canada.ca/en/revenue-agency/services/forms- publications/publications/ic00-1/ic00-1r6-voluntary-disclosures-program.html

[4] GST/HST Memorandum 16-5: https://www.canada.ca/en/revenue-agency/services/forms- publications/publications/16-5/voluntary-disclosures-program.html

[5] Under the former Program, disclosures were divided into two tracks: the General Program, which offered broader relief, and the Limited Program, which applied where there was an element of intentional conduct leading to non-compliance and, accordingly, provided more restricted relief.