Compliance
Compliance Insights: Canada’s Voluntary Disclosures Program Updated October 2025
Canada’s CRA has revised the Voluntary Disclosures Program effective October 1, 2025 — broader eligibility, updated relief levels and new requirements make this a key compliance tool.
By NomadicTax Research Team • 5 min read • November 23, 2025
## What’s Changed Effective October 1, 2025
The **Voluntary Disclosures Program (VDP)** in Canada will be updated with the following changes:
- **Expanded eligibility**: Now includes taxpayers who’ve received educational letters from the CRA about possible non-compliance. Previous eligibility often excluded anyone who’d been contacted. ([canada.ca](https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2025/mistake-on-taxes-changes-voluntary-disclosures-program.html?utm_source=openai))
- **Updated relief amounts**:
- **Unprompted applications** (no CRA communication beforehand): 75% interest relief & 100% penalty relief.
- **Prompted applications** (after CRA issues communication): 25% interest relief & up to 100% penalty relief. ([canada.ca](https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2025/mistake-on-taxes-changes-voluntary-disclosures-program.html?utm_source=openai))
- **Simplified process and language**: Forms and guidance updated; easier to apply electronically.
- **Document requirements adjusted**:
- Foreign-sourced income or assets: last 10 years must be disclosed.
- Canadian-sourced income or assets: last 6 years.
- For GST/HST related disclosures: last 4 years for those applications received after October 1, 2025. ([canada.ca](https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2025/mistake-on-taxes-changes-voluntary-disclosures-program.html?utm_source=openai))
## Who This Impacts
- Individuals and entities who had unintentional errors or omissions in past filings.
- Those who have recently been contacted by CRA via an educational-type letter but not yet audited.
- Small businesses and non-filers looking to clean up prior taxation years without full-blown penalties or audits.
## Actionable Guide for Compliance
1. **Perform a tax health check**: Review past years’ foreign income, assets, and whether you've been contacted by CRA. If so, consider VDP before audit.
2. **Collect necessary documentation**: For each affected year, gather income slips, records of expenses, asset statements—especially for foreign-sourced income.
3. **Apply strategically**: If still unprompted, apply early to gain full relief (75% interest, no penalties). After prompted, there’s still benefit.
4. **Consult a professional**: Given interactions with audits, trusts, international tax, it pays to get expert review.
## Example Scenario
Juan is a Canadian resident who had rental income in Spain for 2020-2024 but never reported it, as it was below warning thresholds. In August 2025, he receives a letter from CRA about potential omissions. Under the updated VDP:
- If he applies **before** CRA opens a formal audit, he qualifies for **prompted application relief**—i.e. up to 25% interest relief and full penalty relief.
- If he had not yet been contacted, his application would be **unprompted**, with better relief (75% interest off).
## Reminder: Risks and Limitations
- Egregious non-compliance or intentional fraud remains excluded.
- VDP doesn’t override other legal requirements—you’ll still need to settle owed taxes, interest.
- Ensure applications are **complete** and **voluntary**; errors in submissions may invalidate relief.
## Conclusion
The October 2025 VDP updates offer meaningful relief and a clearer path for correcting past mistakes. For those with overlooked foreign income, unfiled returns, or errors, now's an excellent time to use these reforms to come into compliance with lower cost and fewer penalties.