Compliance
Understanding Compliance: The Updated Voluntary Disclosures Program and What It Means for You
Starting October 1, 2025, changes to Canada’s Voluntary Disclosures Program make it easier for taxpayers to correct past mistakes and reduce penalties—if they act before audits get you first.
By NomadicTax Research Team • 5-8 min read • November 21, 2025
Canada’s **Voluntary Disclosures Program (VDP)** underwent important revisions, effective **October 1, 2025**, offering expanded eligibility, updated relief amounts, and a simplified filing process. ([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))
This article walks you through the new compliance landscape, with concrete examples and steps to navigate the updated VDP.
## What’s New in the VDP?
### Expanded Eligibility
- Taxpayers who received **educational-type communications** from the CRA—such as letters flagging non-compliance or missing information—may now be eligible to use VDP. Previously, eligibility was more restricted. However, **those under audit, investigation, or with intentional or egregious non-compliance** remain excluded. ([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))
### More Relief, Better Terms
- **Unprompted applications**, submitted before any CRA communication, now offer **75% relief on interest**, and full relief (100%) on penalties.
- **Prompted applications**, filed after receiving CRA communication, offer **25% interest relief**, and up to 100% penalties 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
- Updated forms and plain-language guidance allow easier navigation.
- Required documentation has been clarified, especially around years to disclose: up to **10 years** for foreign-sourced income and 6 years in Canada for unprompted disclosures, 4 years for GST/HST matters. ([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))
## Examples in Practice
- **Scenario A: Missed foreign income** – Sarah, a Canadian resident, forgot to report foreign rental income covering 8 years. She receives a letter from CRA asking to address possible non-reporting de-facto. Under the new rules, she can apply for VDP (prompted), get 25% relief on interest charges, and possibly no penalties.
- **Scenario B: Incomplete expense claims, no prior contact** – John worked from abroad in a past year and claimed travel expenses improperly but did not receive any CRA communication. He can still submit an **unprompted disclosure**, get 75% interest relief, and full penalty relief if he corrects filings over the required period.
## What VDP Can’t Do
- If you’re **already under audit or investigation** for the matter in question, you cannot use VDP for that issue.
- Intentional mis-representation or fraud still carry consequences.
## Step-by-Step Guide to Applying
1. Ensure disclosure is voluntary (you initiated it).
2. Collect required documents covering the relevant years: foreign income (up to 10 years), Canada income (up to 6 years), GST/HST info (4 years).
3. Calculate amounts owed including interest & penalties under new relief terms.
4. Submit the application with full disclosure and payment or payment plan.
5. Await CRA’s acknowledgment and resolution.
## Actionable Advice
- Start gathering records if you believe you may need VDP: foreign bank statements, invoices, past tax slips.
- Engage a tax professional for complex cases like cross-border assets or multinational income.
- Don’t delay: once CRA sends communication, your relief window narrows.
These VDP changes reflect a push toward fairness and increased compliance for those wanting to correct honest errors. Understanding the updated eligibility and relief terms could save you significantly and restore tax peace of mind.