Compliance

How to Use Canada’s Updated Voluntary Disclosures Program to Fix Past Tax Errors

Canada’s revisions to the Voluntary Disclosures Program (VDP) as of October 1, 2025 create more accessible options for taxpayers seeking relief from penalties and interest.

By NomadicTax Research Team • 5-7 min read • November 23, 2025

## What’s Changing Under the VDP as of October 1, 2025 Canada’s CRA has rolled out major changes to the **Voluntary Disclosures Program (VDP)** aimed at helping individuals, businesses, and registrants proactively correct past inadvertent tax errors or omissions. Key changes include simplified forms, broader eligibility, and new relief tiers. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/changes-vdp.html?utm_source=openai)) ### Increased Eligibility - Taxpayers who receive educational letters (e.g. notices that don’t name you specifically but raise general issues) can now apply. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/changes-vdp.html?utm_source=openai)) - Still ineligible: those under audit or investigation, or cases of gross non-compliance. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/about-vdp.html?utm_source=openai)) ### Relief Tiers: General vs Partial Relief - **General Relief** (for unprompted applications): 75% interest relief, 100% penalty relief. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/changes-vdp.html?utm_source=openai)) - **Partial Relief** (prompted by CRA communications): 25% interest relief, up to 100% penalty relief. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/changes-vdp.html?utm_source=openai)) ### Documentation Requirements - Canadian-sourced income/assets: last 6 years. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/changes-vdp.html?utm_source=openai)) - Foreign-sourced income/assets: last 10 years. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/changes-vdp.html?utm_source=openai)) - GST/HST issues: last 4 years. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/changes-vdp.html?utm_source=openai)) ## Actionable Steps to Leverage the Updated VDP 1. **Assess past filings** Identify where you may have under-reported income, missed filing returns, or claimed ineligible deductions, especially if no audit has been initiated. If you received an educational letter about a specific issue, you may still qualify. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/changes-vdp.html?utm_source=openai)) 2. **Gather documentation** Pull together all required forms, returns, and schedules covering the relevant periods depending on the type of error (see above timelines). For foreign income or assets, document up to 10 years. Got GST/HST issues? Include four years. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/changes-vdp.html?utm_source=openai)) 3. **Choose relief type** If you were not contacted by CRA yet, aim for **general relief**. If you were prompted (e.g. a letter, notice, etc.), expect **partial relief**. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/changes-vdp.html?utm_source=openai)) 4. **Submit the application** - Use Form RC199, Voluntary Disclosures Program Application. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/how-apply-vdp.html?utm_source=openai)) - Make sure you include payment or request a payment arrangement for taxes owing. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/changes-vdp.html?utm_source=openai)) - Submit through CRA’s My Account, My Business Account, or by mail/fax. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/how-apply-vdp.html?utm_source=openai)) 5. **Await CRA decision** • Once accepted, you receive relief—interest and penalties—as per your tier. Criminal prosecution risk is removed for disclosed issues. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/ic00-1/ic00-1r7-voluntary-disclosures-program.html?utm_source=openai)) • If CRA requests further documents or information, respond promptly or risk denial. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/review-decison-vdp.html?utm_source=openai)) ## Examples - A freelance designer realizes they failed to report overseas contract income (foreign-sourced) over the past 8 years. No audit or notice yet. They apply under general relief: could receive 75% interest relief and full penalty relief. - A small business receives a notice about under-claimed GST/HST input tax credits from two years ago. They apply after the notice, under partial relief: 25% interest relief, up to full penalty relief. ## Pitfalls to Avoid & Tips for Success - Don’t delay: errors must be at least one year past filing due date. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/how-apply-vdp.html?utm_source=openai)) - If under investigation or audited for the issue, you’re ineligible. - Be complete and transparent; omissions may lead to rejection. - Keep copies of all communications and forms. - Consider consulting a tax professional when foreign income or complex assets are involved. ## Why It Matters These changes represent a **medium-high impact** shift in compliance policy. They reduce barriers for taxpayers to correct mistakes, decrease penalties, and improve fairness in the tax system. For many, the updated VDP offers a lifeline to resolve historical tax exposure without severe financial or legal consequences.