What Is the Voluntary Disclosure Program?
The Voluntary Disclosure Program (VDP) is a voluntary program in which any taxpayer can correct inaccurate or incomplete information reported in a previously filed tax return, or file a late tax return that should have been filed. Use of this program may provide relief of any penalties, however, you still have to pay any taxes owing plus any interest.
Are You Eligible for the VDP?
You are eligible for the VDP if the corrections to your tax return would meet all the following conditions:
- The disclosure is voluntary. This means that you must make this disclosure before CRA notifies you of any compliance actions taken against you
- A penalty would apply
- The information is at least one-year overdue
- It contains all relevant and complete information
Instances of When the VDP Can Be Used
Taxpayers can use this program if the following instances have occurred:
- Failure to file a T1135. This is a form that must be submitted to CRA if you have foreign property exceeding a cost base of $100,000 at any point in the tax year. Example of foreign property are US stocks held through a Canadian bank.
- Failure to report all your income
- Claimed ineligible expenses on your tax return
- Failure to file GST/HST returns
- Filing a late tax return or haven’t filed a tax return in a given year
Proposed Changes to the VDP (2018 Tax Year)
The CRA is currently drafting proposed changes to the VDP that will limit the access of this program to taxpayers. These proposed changes are set to take place starting in 2018. Under the proposed program the VDP will have two tracks for income tax disclosure:
- General Program
- Limited Program
The general program will be for taxpayers who are dealing with accidental minor non-compliance issues. The eligibility and relief are similar to the current VDP with the addition of partial relief (50%) of interest charges.
The limited program is for “major non-compliance” issues. This program will provide relief of criminal prosecution, but will not provide any relief of penalties other than the gross negligence penalty. In addition, this program will not provide any relief of interest owing.
An important fact to remember about the Voluntary Disclosure Program is that under normal circumstances it can only be used once! The CRA does, however, allow for a second use of this program if the taxpayer encounters circumstances beyond their control.
If you thinking you have an instance where you need to use the VDP, contact us to discuss if you are eligible for this program and how to effectively use it.