On 10 September 2025, the Canada Revenue Agency (CRA) released Information Circular IC00-1R7, Voluntary Disclosures Program, and GST/HST Memorandum 16-5-1, Voluntary Disclosures Program (Applications Received On or After October 1, 2025), which overhaul the Voluntary Disclosures Program (VDP) effective 1 October 2025.

The CRA's new VDP policy replaces the 2018 framework, as outlined in IC00-1R6, Voluntary Disclosures Program, and GST/HST Memorandum 16-5, Voluntary Disclosures Program (2018 Policy), by relaxing the "voluntary" requirement, introducing a two-tier relief model and clarifying the CRA's documentation expectations.

Overview

The new policy applies to VDP applications received on or after 1 October 2025. Circular IC00-1R7 applies to income tax VDP matters, while GST/HST Memorandum 16-5-1 applies to VDP matters relating to GST/HST, excise taxes, excise duties, the fuel charge, the luxury tax, the underused housing tax, the digital services tax, tax under the Global Minimum Tax Act (GMTA), the softwood lumber products export charge and the air travelers security charge.

Applications received prior to 1 October 2025 will be considered for VDP relief under the 2018 Policy.

Key changes to the VDP are summarized below.

Expanded eligibility

Applications will be considered "not voluntary," and therefore not eligible for relief under the VDP, only if an audit or investigation has been initiated against the taxpayer or registrant (or a related taxpayer or registrant) in respect of the disclosed information. Audits or investigations include those conducted by authorities other than the CRA. Under the new VDP policy, taxpayers and registrants who receive communications from the CRA about potential noncompliance issues may qualify for relief under the VDP.

This change softens the more restrictive 2018 Policy, under which the CRA often would not accept a VDP application from taxpayers or registrants who had been contacted by the CRA.

Two tiers of relief

The new VDP policy replaces the existing "General Program" and "Limited Program" application streams with the following two tiers of relief:

• General relief (unprompted application): Taxpayers and registrants who submit a VDP application without receiving prior communication from the CRA about an identified compliance issue related to the disclosure may qualify for 75% relief of applicable interest and 100% relief of applicable penalties. An application made following receipt of an education letter or notice offering general guidance related to a particular topic will be considered unprompted.
• Partial relief (prompted application): Taxpayers and registrants who submit a VDP application following communication from the CRA about an identified compliance issue related to the disclosure¹ may qualify for 25% relief of applicable interest and up to 100% relief of applicable penalties. An application will also be considered prompted if it is made after the CRA has received information from a third party regarding the potential tax noncompliance.

The VDP continues to provide 100% relief of applicable penalties and interest for applications involving GST/HST "wash transactions"² that qualify for reduced penalties and interest under GST/HST Memorandum 16-3-1, Reduction of Penalty and Interest in Wash Transaction Situations.

For all VDP applications that are eligible for relief, gross negligence penalties will not apply and no referral for prosecution will be made on the disclosed issues.

Under the 2018 Policy, taxpayers and registrants who qualify under the General Program are generally only eligible for relief from penalties and 50% of the applicable interest. For VDP applications concerning income tax, this partial interest relief was limited to assessments for years preceding the three most recent years of returns required to be filed. Under the Limited Program, no penalty and interest relief were available; however, for all VDP applications eligible for relief under the 2018 Policy, gross negligence penalties would not apply and no referral for prosecution would be made on the disclosed issues.³

Broader statutory coverage

The new VDP policy in Goods and Services Tax/Harmonized Sales Tax (GST/HST) Memorandum 16-5-1 expressly includes additional regimes, including the Underused Housing Tax Act (UHTA), the Select Luxury Items Tax Act (SLITA), the Digital Services Tax Act (DSTA) and the GMTA.

Clearer documentation scope

For VDP applications involving multiple years of noncompliance, taxpayers and registrants should include supporting documents for the following periods:

• Foreign-sourced income or assets: The most recent 10 years
• Canadian-sourced income or assets: The most recent six years
• GST/HST-related information: The most recent four years

Documentation is not required for any tax years or reporting periods within the above periods that have no errors or omissions. Taxpayers and registrants should be prepared to provide additional documents to the CRA upon request.

Process improvements

The CRA will release a simplified version of Form RC199, Voluntary Disclosures Program (VDP) Application, on 1 October 2025.

Under the 2018 Policy for income tax matters, relief was subject to the 10-year limitation period under subsection 220(3.1) of the Income Tax Act (ITA), and this limitation will continue to apply to VDP applications accepted under the CRA's new policy. For VDP applications made under GST/HST Memorandum 16-5-1, relief is provided in accordance with the limitation periods for relief and interest found in the relevant Acts.

Comparison

The following table compares key details of the new VDP policy to the 2018 Policy:

Key takeaways

The CRA's broadened view of when a VDP application is "voluntary" means that many taxpayers and registrants who were ineligible for relief under the 2018 Policy may now qualify for relief under the new VDP policy.

The new VDP policy provides stronger incentives to make an application for relief. These include the ability to obtain more generous relief of applicable interest for unprompted applications and the ability to obtain partial relief of applicable interest and discretionary relief of applicable penalties for prompted applications, which generally would not have been eligible for any relief under the 2018 Policy.

Finally, the CRA's clarified guidance on what documents to include in a VDP application, and the simplified Form RC199, will be welcome for taxpayers and registrants considering making an application under the VDP.

Next steps

Taxpayers and registrants may want to consider some of the following actions.

• Leverage pre-disclosure discussions: The anonymous, informal and nonbinding pre-disclosure channel continues to be available. Taxpayers and registrants may wish to participate in preliminary discussions with the CRA to gauge their eligibility for the VDP and the potential relief available.
• Triage noncompliance issues now: Taxpayers and registrants who have not yet received communication from the CRA about an identified compliance issue should consider filing a VDP application before receiving any letter or notice that could disqualify them from general (unprompted) relief.
• Gather documentation in accordance with the new requirements: The revised Form RC199 will be available as of 1 October 2025. Processes should be implemented to produce the documents for the relevant years expeditiously.