Effective October 1, 2025, the Canada Revenue Agency (CRA) changed its Voluntary Disclosures Program (VDP),1 aiming to reduce barriers to voluntary compliance and provide clearer guidance for applicants seeking to correct unintentional filing errors or omissions.
Key updates include a streamlined application form (Form RC199), expanded eligibility criteria, and the introduction of two new relief tiers – general and partial relief. The general relief tier offers 75-percent interest relief and full penalty relief for unprompted disclosures, while the partial relief tier provides 25-percent interest relief and up to full penalty relief for prompted disclosures.
The updated rules for VDP applications made after October 1, 2025, are outlined in GST/HST Memorandum 16-5-12 and Information Circular IC00-1R7.3
WHY THIS MATTERS
Broader eligibility and streamlined procedures may make it easier for taxpayers to correct past errors, potentially lowering the risk and amount of penalties and interest.
Organizations – as well as third-party tax service providers serving clients – should assess their compliance records to determine if any prior inaccuracies could be addressed under the updated VDP framework.
Organizations that have employee populations that travel to Canada on business that are not payroll compliant may wish to consider whether the VDP might be an opportunity to address risk for prior years, given the current and expected ongoing focus on this area by the CRA.
The distinction between general and partial relief highlights the benefit of voluntary action before any contact from the CRA.
Key Highlights
Effective Date and Transition
Changes under Information Circular IC00-1R7 and GST/HST Memorandum 16-5-1 took effect on October 1, 2025. Applications submitted before this date will be assessed under the previous guidelines.
Application Process
Form RC199 was updated to simplify submission. The revised form became available starting October 1, 2025.
Eligibility Criteria
The program now allows applications from individuals or entities who were contacted by the CRA regarding potential non-compliance. However, those under audit, investigation, or with serious non-compliance remain ineligible.
Relief Structure
- General relief (for unprompted disclosures): 75-percent interest relief and full penalty relief.
- Partial relief (for prompted disclosures): 25-percent interest relief and up to full penalty relief.
Documentation Requirements
The requirements for supporting documentation have been clarified, specifying the number of years for which documents must be provided:
- For income or assets sourced outside Canada, the most recent ten years.
- For income or assets sourced within Canada, the most recent 6 years.
- Goods and Services Tax/Harmonized Sales Tax (GST/HST) matters, documentation is required for the most recent four years.
- Only years with errors or omissions must be included; CRA may request additional documentation.
KPMG INSIGHTS
Steps to Consider
In light of the changes, both individuals and organizations affected by the updated VDP may wish to consider the following steps:
- Determine whether compliance matters qualify for the VDP, given the new relief tiers and exclusion of cases under audit or investigation.
- Revise internal policies and procedures to align with the updated VDP framework and inform and train relevant personnel on the new documentation standards and application process.
What’s Next?
The changes may lead to increased VDP participation and improved overall compliance. If guidance is issued in future by CRA, KPMG in Canada will endeavor to update GMS Flash Alert readers.
If assignees and/or their program managers have any questions or concerns about the modified VDP, how to avail of it, its application and potential impacts, and appropriate next steps, they should consult with their qualified tax professional or a member of the GMS tax team with KPMG in Canada (see the Contacts section).
FOOTNOTES:
1 Canada Revenue Agency, “Changes to the Voluntary Disclosures Program” (Sept. 10, 2025).
2 Canada Revenue Agency, “Voluntary Disclosures Program (Applications Received On or After October 1, 2025),” GST/HST Memorandum 16-5-1 (Sept. 2025).
3 Canada Revenue Agency, “Voluntary Disclosures Program,” IC00-1R7 (Sept. 10, 2025).
Contacts
Disclaimer
The information contained in this newsletter was submitted by the KPMG International member firm in Canada.
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