The CRA has issued new rules via Information Circular IC00‑1R7 – Voluntary Disclosures Program and GST/HST Memorandum 16‑5‑1 for voluntary disclosure applications made through Canada’s Voluntary Disclosures Program (VDP) on applications received on or after October 1, 2025.
The Canada Revenue Agency (CRA) has long encouraged taxpayers to come forward voluntarily to correct past tax errors or omissions. Through the VDP, individuals and businesses can avoid severe penalties and prosecution if they meet certain conditions.
The relief framework has been restructured around two tiers: “Unprompted” and “Prompted” applications. If you’re navigating a complex disclosure, consulting a Toronto tax lawyer can be invaluable. The new framework rewards honesty and timeliness, but it also demands thoroughness and documentation.
Understanding the New System
Unprompted disclosure means you come forward before the CRA or a third-party identifies the issue (or before a targeted enforcement contact). You may still qualify for this stream if you receive a general education letter about potential reporting issues. In these cases, a taxpayer can receive up to 100% penalty relief and 75% interest relief on the 10 most recent taxation years for the relevant tax issue.
Prompted disclosure means a taxpayer comes forward after the CRA has received information from a third party about the taxpayer’s potential non-compliance, or after the CRA has sent communication about a specific issue and asked that they update their records by a certain date. Prompted disclosures are still eligible for up to 100% penalty relief, but interest relief is capped at 25%.
Repeat disclosures or disclosures from large entities (which previously were strictly limited) are now under more flexible rules.
The scope of tax regimes eligible under the VDP is broader: the guidance now explicitly includes taxes under the Underused Housing Tax Act, Select Luxury Items Tax Act, the Global Minimum Tax Act, and other newer regimes.
Who is not eligible
For a disclosure to be considered voluntary, the issue being disclosed can’t already be the subject of an audit or investigation by the CRA or a law enforcement agency, securities commission, or any other federally or provincially regulated authority.
The VDP is also not available for seeking relief on existing interest or penalties or if there was an insolvency event (e.g., bankruptcy) for the years involved in the disclosure application, among other criteria.
Application requirements
Supporting documentation must be submitted with the application (or as required), and documentation-look-back periods were clarified (e.g., six years for domestic, ten years for foreign).
Why These Changes Matter
Tax administration and enforcement are increasing as the CRA is leveraging international reporting systems and advanced analytics to identify unreported income, offshore accounts, and false filings. This heightened visibility means that waiting to come forward carries greater risk than ever before.
The 2025 updates emphasize that voluntary disclosure is now a more viable path to compliance than ever before, but one that must be handled with expertise to help ensure acceptance. The CRA’s goal is not to punish honest taxpayers but to ensure fairness and accountability across the system. For those who act early, the VDP is a crucial tool to resolve past tax issues while reducing penalties.
