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How and when to use the CRA’s Voluntary Disclosures Program

When a taxpayer has made a mistake or omission on a previous return, it can make sense in many cases to file an application under the VDP

Co-worker showing colleague something on tabletTo be eligible for relief, a VDP application must fulfil several specific criteria Getty Images / Cecilie_Arcurs)

As practitioners know, the simplest way to deal with a mistake or omission on a personal income tax return is often to file a T1 adjustment. But in certain circumstances—if a client hasn’t filed a return for a few years, for example—it may be a good idea to file an application under the Voluntary Disclosures Program (VDP).

“The VDP is meant specifically for mistakes or omissions that would be likely to attract a penalty if identified by the Canada Revenue Agency,” says Bruce Ball, vice-president of taxation at CPA Canada. “The program is not meant to do away with the taxes the client would have to pay. But it could potentially provide relief from prosecution and, in some cases, from any penalties they would have to pay.”

The CRA site contains a wealth of information on the VDP. But here are some considerations to keep in mind when deciding whether to use the program for income tax. (Note that it is also available for GST/HST. Also, we will not deal here with cases where tax evasion may be involved. These should be referred to a lawyer specialized in this area.)


As the CRA site points out, there are a number of situations in which it might make sense to apply under the VDP. These include cases where:

  • A return for a previous year was not filed and it is now late
  • Ineligible expenses were claimed on a tax return
  • Required Information returns (for example, Form T1135, Foreign Income Verification Statement) were not filed
  • Income from foreign sources that is taxable in Canada was not reported on a tax return that is already filed.

For CPA David Posner, a partner with Zeifmans, many of the cases he handles have to do with the failure to report foreign assets or income. “For example, the client might own shares of Apple. And even though these shares can be held in a Canadian brokerage account, they are considered foreign because Apple is a foreign company. Or the client might have a certain sum in a bank account abroad but never disclosed this to the government. In both cases, they should have filed the appropriate foreign asset form but failed to do so—or they may be late in filing it.”

Posner also deals with cases where a client has simply failed to file a return for a previous year or several previous years. “If a taxpayer didn’t file at all and will owe significant income tax, there’s really no reason not to go through the voluntary program because they have to file and pay anyway.” In many cases, filing a form or return late can result in an automatic penalty, which is why the VDP can be beneficial.


To qualify for relief, the CRA says that an application must:

  • Be voluntary (i.e., taxpayers must submit their application before the CRA takes any enforcement action against them).
  • Be complete (taxpayers must include all relevant information and documentation, and make sure to disclose all taxation years affected). If a taxpayer wants to declare income that goes back several years—2011 to 2015, for example—but they no longer have all the backup to confirm the amounts, they must estimate them as closely as possible, says Posner.
  • As mentioned, involve the application or potential application of a penalty.
  • Include information that is at least one year past the filing due date. As Posner points out, this is one element that makes it different from a T1 adjustment. He also notes that the program can be applied to returns going back up to 10 years.
  • Include payment of the estimated tax owing.


In straightforward cases (for example, where just one taxpayer is involved and the amounts in question are not large), a CPA may conveniently file and pursue the VDP application on the taxpayer’s behalf. But in some cases—especially where significant sums and/or risk are involved, where the issue extends beyond one person to include other taxpayers or more complex issues, and/or where the case might fall into the limited (rather than the general) VDP program—they might consider involving an experienced lawyer. “In such a case, the lawyer can be the primary adviser dealing with the CRA, and can engage the CPA to prepare the filings that are in arrears,” says Ball. [For more on the differences between the general and limited programs, see VDP: Comparing the general and limited programs.]

If a lawyer is to be consulted, it’s a good idea to involve them early in the process, says Mark Tonkovich, a partner with Blake, Cassels and Graydon LLP. “There are many benefits that can come out of pursuing the VDP in the right situations. That’s why we do a preliminary assessment to determine whether the client’s issues make the matter a good candidate for this type of remedy. There are also situations where the client is not sure whether a VDP application is available, or whether it is the best path forward for them. Especially if there may be greater sensitivity with disclosing the underlying issues, having an initial (confidential and privileged) conversation with a lawyer that specializes in tax disputes may be prudent.”

For Tonkovich, there is no such thing as a typical case: “Generally, because of the kind of clients we have, the issues I see tend to be of greater complexity and involve a lot of unique facts,” he says. He is also contacted if the subject matter of the VDP application may have an impact beyond the prior tax filings, such as where a client has a recurring issue or if future tax filings or transactions depend on it. “Once clients know there is an error, they can’t misrepresent the issue in a future tax filing,” he says.


The CRA site contains extensive information on how to apply. From the adviser’s point of view, however, here are the usual steps in the process.

  1. Fact-finding: The adviser talks to the client to gain a high-level understanding of the potential error and determines whether the VDP is the right course of action. “If a lawyer is dealing with the case, they may engage an accountant at this point,” says Ball. Fact-finding may also include efforts to determine whether the client has had any previous correspondence with the CRA about the issue. “If they have, this may disqualify them from applying through the VDP,” Posner says.
  2. Preparing the filing: The adviser prepares a Form RC199 (or equivalent letter) together with all requisite signatures, CRA returns, forms and schedules needed to fix the error or omission.
  3. Waiting for an answer: “Usually, we’ll get an initial response letter from the CRA saying that the application has met the general requirements for the VDP program and will be put in a queue for a VDP officer to consider it,” says Tonkovich.
  4. Engaging with the CRA: Once a callback and/or letter are received, the adviser starts engaging with the VDP officer. “There can be a fair bit of back and forth, depending on the complexity of the issue,” Tonkovich says. “This ultimately leads to a decision letter from the CRA.”
  5. Further steps: If the taxpayer is not satisfied with the decision, they can ask for a second administrative review. “If they are still not pleased or satisfied with that process, they may file an application for judicial review to the Federal Court,” says Tonkovich.


For both Posner and Tonkovich, their experience with the VDP has been extremely successful. And this has much to do with ensuring their clients’ applications meet the five criteria, and present the required information as clearly and convincingly as possible. “We do quite a bit of work even before we file the application to make sure we have all the facts,” says Posner. “And we know it’s not enough for the client to provide partial information. If they had $100,000 in income that they failed to report, they cannot decide to report just half of that. They have to be completely honest.”


Learn more about general and limited voluntary disclosures programs, as well as the CRA’s objections process and taxpayer relief program. Plus, keep up to date on important tax issues with our tax blog.