The Voluntary Disclosure Program (VDP) is a second chance offered to certain eligible taxpayers by the Canada Revenue Agency (CRA). Suppose you are going through your historical returns and find that you failed to file a tax return in a year and/or incorrectly reported information on a previous tax return. In that case, the VDP grants you with ‘amnesty’ from prosecution and other penalties for the oversight or omission – on the condition that you come clean on your own and meet the other criteria mentioned below.
A Voluntary Disclosure Program (VDP) cannot be used arbitrarily as an excuse for failing to file your tax return in the previous year. When filing a Voluntary Disclosure Application, the following criteria needs to be met for it to be considered valid and appropriate for your purposes:
Once the voluntary disclosure is filed and reviewed by the CRA, you will receive a notice indicating whether it has been accepted or not. It is pertinent to note here that filing using the VDP does not exempt you from paying the taxes and interest on the new returns. In certain cases, the CRA may waive some penalties. However, these waivers are granted on a case-by-case basis as per each taxpayer’s unique circumstances and disclosure. Also, the CRA reserves the right to audit or verify information provided in a VDP application irrespective of it being accepted under the VDP or not.
In March 2018, the CRA modified its policies around the Voluntary Disclosure Program. Under the old program, similar levels of treatment were provided to all accepted applicants. Post-March 2018, the VDP was split into two separate sub-programs.
Assuming that the aforementioned criteria are met, the most common reasons for which to use the Voluntary Disclosure Program include:
While the Voluntary Disclosure Program is a lifeline for many, it is important to take the application process seriously.
For any questions regarding the VDP, please contact Prasad & Company LLP today. Our experts have worked with many clients to guide them through each step of the process, communicate on their behalf with the CRA, and ultimately ensure a painless and streamlined experience in what can potentially be a stressful issue for many.
This article has been prepared for informational purposes only and is not intended to provide or be relied upon for tax, legal, or accounting advice. Please contact Prasad & Company LLP to discuss these matters in the context of your particular circumstances. Prasad & Company LLP, its partners, employees, and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.