Income tax - Voluntary Disclosures Program: Overview
Who can apply?
Most taxpayers, including individuals, employers, corporations, partnerships or trusts, can make a VDP application to correct information on a past income tax return or file a missing one.
Should you apply?
Situations when you should consider applying for relief include:
- You did not report, or under-reported, your income
- You claimed ineligible expenses
- You did not remit employee source deductions (for example, pension plan or employment insurance deductions)
- You did not file certain information returns (for example, Form T1135, Foreign Income Verification Statement)
- You did not report foreign sourced income that is taxable in Canada.
For more information about when relief may or not be considered, go to IC00-1R6, Voluntary Disclosures Program.
What do I need to initially submit?
For us to make a decision on your application, you need to submit a completed and appropriately signed Form RC199 (or equivalent letter) together with all the CRA returns, forms and schedules needed to fix the error or omission.
If after our initial review, we determine that your application is missing information and/or documentation, we may deny your application. At times, we may contact you to request the missing information/ documentation and negotiate a reply date.
Does everyone receive the same relief?
No, the type and level of relief is granted on a case by case basis.
Once the needed information is submitted (as above), a further review begins to ensure your application meets the five program conditions to qualify for relief. If it does, based on the information you provided, your application will be placed into the General Program or the Limited Program.
General Program
The General Program is intended for taxpayers who want to come forward and correct unintentional errors. If your application is accepted into the General Program, we will provide the following relief:
- you will not be charged penalties
- you will not be referred for criminal prosecution related to the information you disclose
- you may be eligible for a reduced interest rate on the amount you owe
The interest reduction usually applies to the tax years preceding the three most recent years that you had to file a return for. Generally, the CRA will reduce the interest rate to 50% of the applicable rate for those preceding years. The full interest rate will be applied for the three most recent years of returns.
Limited Program
The Limited Program applies to taxpayers who intentionally avoided their tax obligations. If your application is accepted into the Limited Program:
- you will not be referred for criminal prosecution related to the information you disclose
- you will not be charged for gross negligence penalties; however, you will be charged other penalties as applicable
- no interest relief is provided
What factors are considered when determining the appropriate program of relief?
In both programs, the following factors are considered:
- the dollar amounts involved
- the number of years of non-compliance
- the sophistication of the taxpayer
- how quickly the taxpayer acted to correct their non-compliance upon its discovery
- if the disclosure is made after a CRA statement about 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 taxpayers working in a particular sector about a compliance issue).
Are there additional factors for the Limited Program?
Yes, the following are some of the additional factors considered when determining whether to accept an application into the Limited Program:
- there had been deliberate or wilful default or carelessness amounting to gross negligence
- avoiding detection through the use of offshore vehicles or other means
- for example, a taxpayer who opened an offshore bank account in 2010 and has been transferring undeclared business income earned in Canada to that account since that time would not normally qualify under the General Program.
- generally, applications by corporations with gross revenue in excess of $250 million in at least two of their last five taxation years, and any related entities.
Even if your situation includes one these factors, you may still be eligible for the General Program. For example, a sophisticated taxpayer may still correct a reasonable error through the General Program.
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