GST/HST – Overview

  1. Introduction to VDP
  2. Overview
  3. What you need to know
  4. How to apply
  5. After you apply

Who can apply?

Registrants and any other person who is required to report or remit an amount (on an account of tax) can make an application to the Voluntary Disclosures Program (VDP). The term registrants includes:

  • a goods and services tax / harmonized sales tax (GST/HST) registrant/claimant
  • an excise duty licensee / registrant
  • an excise tax licensee
  • an excise tax refund claimant
  • an air travelers security charge registrant
  • a designated air carrier
  • a registered exporter of softwood lumber products

GST/HST stream applications

The VDP gives registrants the opportunity to voluntarily correct inaccurate or incomplete information or to disclose information not previously reported in their filings. Through the VDP, registrants may apply for relief from penalties and interest for disclosures related to GST/HST, excise tax, excise duty, the softwood lumber products export charge, and the air travelers security charge.

Examples of what a GST/HST application may involve are:

  • undisclosed tax liabilities
  • improperly claimed input tax credits
  • refunds or rebates
  • unpaid tax or net tax from a previous reporting period
  • any other amount not previously reported to the Canada Revenue Agency (CRA)

Your disclosure may also relate to incomplete information on a return for a reporting period or a failure to file information returns as and when required.  

For more information, go to GST/HST Memorandum 16-5.

For more information on collecting, recording, calculating, and remitting GST/HST, go to RC4022 General Information for GST/HST Registrants

GST/HST categories and potential relief

Effective March 1, 2018, GST/HST, excise tax, excise duty, the softwood lumber products export charge, and air travelers security charge VDP applications are processed under three categories:

  • the Category 1 - Wash Transactions Program
  • the Category 2 - General Program
  • the Category 3 - Limited Program

The determination of which category an application will be processed under will be made by the VDP on a case-by-case basis.

Category 1 - Wash Transactions Program

Disclosures generally considered to be wash transactions are those where a supplier has failed to charge and collect GST/HST from a registrant who is entitled to a full input tax credit. The relief provided through the Wash Transactions Program is provided only for applications involving GST/HST ‘wash transactions’ that are eligible for a reduction of penalties and interest under the policy stated in GST/HST Memorandum 16-3-1, Reduction of Penalty and Interest in Wash Transaction Situations

The Wash Transactions Program provides full relief to registrants who want to correct unintentional errors. If your application is accepted under the Wash Transactions Program, you will not be referred for criminal prosecution related to the information disclosed and you may be eligible for 100% penalty and interest relief on the transactions disclosed.

Category 2 - General Program

The General Program provides relief to registrants who want to correct unintentional errors. The General Program provides relief for applications disclosing non-compliance or errors including, but not limited to, situations involving:

  • GST/HST wash transactions that are not eligible for a reduction of penalty and interest under the GST/HST Memorandum 16-3-1
  • reasonable errors
  • failure to file information returns
  • no gross negligence or deliberate avoidance of tax
  • over-claimed rebates

If your application is accepted into the General Program, you will not be charged penalties and will not be referred for criminal prosecution related to the information disclosed. Additionally, you may be granted partial interest relief of 50% of the applicable interest rate that applies for the years disclosed. 

Category 3 - Limited Program

The Limited Program limits the level of relief for registrants who intentionally avoided their tax obligations. If your application is accepted into the Limited Program, you will not be referred for criminal prosecution with respect to the information being disclosed and no gross negligence penalty will be applied even where the facts establish that you are liable for such a penalty. However, you will be charged other penalties as applicable.

No interest relief will be provided for applications processed under the Limited Program.

The following factors may be considered in determining if an application is accepted into the Limited Program:

  • GST/HST was charged or collected but not remitted
  • efforts were made to avoid detection (for example, participation in the underground economy)
  • the disclosure is made after an official CRA statement regarding its intended specific focus of compliance (for example, the launch of a compliance project or campaign) or following broad-based CRA correspondence (for example, a letter issued to registrants involved in a particular sector about a compliance issue)
  • there had been deliberate or wilful default or carelessness amounting to gross negligence

Applications by corporations, and any related entities, with gross revenue in excess of $250 million in at least two of their last five taxation years will typically be considered through the Limited Program. In all cases, the following factors may be considered when determining which category a VDP application should be processed:

  • the dollar amounts involved
  • the number of years of non-compliance
  • the sophistication of the registrant
  • how quickly the registrant acted to correct their non-compliance upon its discovery

The existence of a situation or one factor will not necessarily mean that you are eligible only for the Limited Program. For example, a sophisticated registrant may still correct a reasonable error through the General Program.

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