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Requirements for the Voluntary Disclosure Program

We all make mistakes, but making one on your annual tax return can be costly and can lead to you paying extra penalties or even facing prosecution. 

It could be something as innocent as a calculation error on your tax form or deducting personal expenses from your income. Often, we do not understand the law or misinterpret it. 

The Canada Revenue Agency created the Voluntary Disclosure Program (VDP) in 2018 to enable non-compliant taxpayers to rejoin the tax system.

Requirements for the Voluntary Disclosure Program

By using the Voluntary Disclosure Program, you are protected from penalties and will receive amnesty from prosecution. Canadians are grabbing the opportunity to correct past mistakes, and the VDP responded by offering partial interest relief, which is usually equal to about 50% of the interest owed.

For an application to be valid, you must comply with specific requirements. Read on for more information.

VDP Requirement #1: Voluntariness

The most important part of the VDP is that it is voluntary. The Canadian Revenue Agency may not always catch all mistakes immediately, so it is up to you to volunteer the information. 

Your disclosure will be invalid if the CRA determines that you were aware of a current or upcoming audit, investigation, collection action, or another enforcement action from them. The amnesty will also not apply if the CRA has asked for information or received information via a third party.

VDP Requirement #2: Tax Owing

The VDP applies to Canadian citizens who pay their taxes. The program does not apply to situations where the taxpayer has not paid taxes or received a refund. 

When a taxpayer is non-compliant with their reporting responsibilities, there is no penalty associated with that non-compliance. It is possible to meet this requirement by filing a late-filing penalty, failing to remit a fine, or omitting a fee.

VDP Requirement #3: Completeness

Ensuring your application is complete and meets all the criteria for a valid Voluntary Disclosure is vital and will affect your case’s outcome. 

If a disclosure relates to unreported foreign/offshore assets, you will be required to provide bank statements or similar documents. If you are disclosing unreported income, be prepared to provide copies of pay stubs or other documentation that details the amounts disclosed. 

The CRA may deny a disclosure as incomplete if it cannot verify the disclosed amounts’ details.

More Information on the CRA’s Voluntary Disclosure Program

Voluntary Disclosure Program Eligibility
  • Unreported income
  • Unfiled tax returns
  • Failure to disclose foreign assets
  • Failure to disclose foreign income
  • Expenses claimed that were not eligible
Voluntary Disclosure Program Penalties
  • Penalties for non-disclosure could be up to $ 25,000 and/or jail time
  • Penalties for late filing are 5%, plus 1% per month for each month the balance remains unpaid
  • Gross negligence penalties can be up to 50% of the estimated tax that is owed
Voluntary Disclosure Program Form 

On form RC199, provide the following information:

  • Your personal contact details
  • Details of your authorized tax representative
  • A detailed description of your circumstances with all relevant facts
  • Confirm that the application is voluntary
  • Sign the declaration

Learn more about how you can qualify for the CRA’s Voluntary Disclosure Program by consulting with Faris CPA today.

Pro Tip:

“Remember that you may be disqualified and the Agreement rendered null and void if you don’t comply with the terms of the Agreement or if any misrepresentations of facts appear in the Application.”

VDP Requirement #4: One Year Past Due

VDP Requirement #4: One Year Past Due

To qualify for the Voluntary Disclosure Program, you can provide information only for tax years that are at least one year past the filing due date. You can also include recent information based on your circumstances. 

An omission on foreign asset reporting that is at least one year past due must be reported in combination with other omissions on foreign asset reporting from prior years.

Get Your CRA Tax Issue Solved With Faris CPA

The VDP is for people and businesses who do not fully understand their tax obligations. A professional Canadian tax CPA at our firm will advise you whether you qualify to be a part of the VDP at all and, if so, under what track you are likely to be accepted. 

At Faris CPA, we believe in building strong client relationships and serve a wide variety of individual and corporate clients, regardless of size and industry. We provide high-level accounting, financial, taxation, and business advisory services.

Call Faris CPA today for a confidential initial assessment at 1-844-340-5771.

Requirements for the Voluntary Disclosure Program FAQs

What happens if the CRA rejects my Voluntary Disclosure Program application?

If your application is unsuccessful, you will be notified by the CRA in writing, and you can then appeal to the Director of the Tax Services Office (TSO) to reconsider the decision. If the outcome is the same, your tax lawyer can then submit a second-level review request. If that is also unsuccessful, you can then file a judicial review application in Canada’s Federal Court.

Is it possible to provide tax information for three years past the filing deadline?

Yes, it is possible; in most cases, the CRA will go back three years to review information on your taxes. The VDP will provide a penalty or relief going back 10 years.

How many times can a taxpayer participate in the CRA’s Voluntary Disclosure Program?

As long as you adhere to the criteria set out by the VDP, you will be able to use the program more than once. Your application must be voluntary and complete and must involve potential penalty or interest.

About the Author

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Pro Tip

ACCESSING THE SMALL BUSINESS DEDUCTION IN YOUR BUSINESS

The Small Business Deduction gives businesses a tax deduction on the first $500,000 of income. This saves an eligible corporation around up to $50,000 in income taxes. There are a number of conditions that have to be met to be eligible for this deduction.

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