Proposed Changes to the Voluntary Disclosures Program

To promote compliance with Canada’s tax laws, the Canada Revenue Agency (“CRA”) implemented a program, the VDP, to encourage taxpayers to voluntarily correct omissions in their tax filings, including income tax, GST, source deductions and excise tax.

Taxpayers who make a valid disclosure will have to pay the taxes or charges plus interest.  However, they will not be subject to a penalty or prosecution that the taxpayer would otherwise be subject to.  CRA recently released a Draft Information Circular which discusses proposed changes to the VDP, which, if implemented, will be effective January 1, 2018.   The proposed changes introduce two tracks for income tax disclosures – a General Program (similar to the current VDP) and a Limited Program.

Relief available under the General Program may be available if a taxpayer:

  • failed to fulfill obligations under the Income Tax Act, or other applicable act
  • failed to report any taxable income received,
  • claimed ineligible expenses on a tax return,
  • failed to remit source deductions of their employees,
  • failed to file information returns, or
  • failed to report foreign sourced income that is taxable in Canada

Limited relief available under the Limited Program for applications that disclose major non-compliance, including one or more of the following situations:

  • active efforts to avoid detection through use of offshore vehicles, etc.,
  • large dollar amounts,
  • multiple years of non-compliance,
  • a sophisticated taxpayer,
  • the disclosure is made following official CRA correspondence, statements or campaigns,
  • a high degree of taxpayer culpability contributed to the failure to comply.

A comparison of the current and the proposed programs can be found by clicking here. 

Additional details regarding the VDP can be obtained from your tax advisor. If you are considering making a disclosure, the application should be made prior to January 1, 2018, under the current program as the new programs will not be as favorable as the current program.

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