Tax Insights: Voluntary Disclosures Program – Drastic changes underway

June 19, 2017

Issue 2017-28

In brief

Draft Information Circular – IC00-1R6 – Voluntary Disclosures Program (VDP), which was recently released by the Canada Revenue Agency (CRA) for discussion purposes, proposes numerous changes that would significantly alter the VDP. These include:

  • the apparent elimination of the “no-name” disclosure process
  • the introduction of two “tracks” of disclosures 
  • less generous VDP relief in certain circumstances, particularly in cases of “major non-compliance”
  • no relief for: 
    • corporations with gross revenue exceeding $250 million in at least two of their last five taxation years, and 
    • applications relating to transfer pricing adjustments and transfer pricing penalties
  • limited objection rights
  • the payment of the estimated tax at the time of the VDP application, and
  • disclosure of the identity of an advisor who assisted the taxpayer in respect of the non-compliance

The revised program, if implemented as proposed in Draft IC00-1R6, would apply starting January 1, 2018.

In detail


The VDP under the Income Tax Act allows taxpayers to correct previous non-compliance. The CRA’s IC00-1R5 describes the manner in which the CRA will administer the VDP. 

In response to the recommendations of the Standing Committee on Finance and the report of the Offshore Compliance Advisory Committee (see our Tax InsightsVoluntary Disclosures Program in jeopardy”—which commented on the perceived shortcomings of the VDP—the CRA released draft IC00-1R6, which proposes significant changes to the administration of the program.

Elimination of no-name VDP 

Draft IC00-1R6 eliminates the no-name VDP. Instead, taxpayers are invited to participate in preliminary discussions with the CRA on a no-name basis. However, this process is informal, non-binding on the CRA, and designed only to provide information about the process, risks of non-compliance and relief available.

Two tracks

Draft IC00-1R6 introduces two tracks for income tax disclosures – a General Program and a Limited Program.

General Program

The General Program is directed at inadvertent and minor non-compliance. The requirements and relief are similar to those described in IC00-1R5, with some minor changes, including a limitation on interest relief to 50% of the applicable interest for any year in which interest relief may be available.  

In addition, as discussed below, taxpayers will be required to include payment of the estimated tax owing with the VDP application. 

Limited Program 

“Major non-compliance” will disqualify taxpayers from the General Program. However, limited relief may be available under the Limited Program. Draft IC00-1R6 states that major non-compliance includes: 

  • active efforts to avoid detection through the use of offshore vehicles or other means
  • large dollar amounts
  • multiple years of non-compliance
  • a sophisticated taxpayer
  • the disclosure is made after an official CRA statement regarding its intended focus of compliance or following CRA correspondence or campaigns
  • other circumstances in which a high degree of taxpayer culpability contributed to the failure to comply

The relief available under the Limited Program is significantly curtailed.  While relief from criminal prosecution is still available, interest relief is not, nor is relief from penalties other than gross negligence penalties.  

The determination of whether an application should be processed under the Limited Program will be made case-by-case. Applications processed under this program will be reviewed for completeness by a specialist area before being accepted.

When VDP relief will not be considered

In addition to the circumstances described in IC00-1R5, draft IC00 1R6 includes five additional circumstances in which VDP relief will not be considered:

  • reporting income from proceeds of crime
  • an application by a person in receivership or who has become bankrupt
  • an application by a corporation with gross revenue over $250 million in at least two of its last five taxation years
  • applications relating to transfer pricing adjustments or penalties 
  • applications that depend on an agreement being made at the discretion of the Canadian competent authority under a tax treaty provision

Limited objection rights

While taxpayers cannot object to reassessments made under the “Taxpayer Relief” legislation,1 draft IC00-1R6 states that disclosures accepted under the Limited Program will require taxpayers to waive their objection rights in respect of taxes assessed. 

However, the waiver would not prevent the taxpayer from filing a Notice of Objection in respect of calculation errors, characterization issues (e.g. income vs. capital), or other matters that were not the subject of the disclosure. 

Additional condition for relief

Under the existing system, valid disclosures are those that are complete, voluntary, more than one year past due and involve the application of a penalty. Draft IC00 1R6 introduces a new condition that must be met to qualify for relief – the VDP application must include payment of the estimated tax owing. 

A taxpayer that is unable to pay the estimated tax in full and provides evidence of this inability may, with the CRA’s approval, provide security for the payment.

Information required 

When applying for a VDP, the taxpayer must disclose certain information. Draft IC00-1R6 states that in addition to the existing requirements, a taxpayer must disclose the name of any advisor who provided assistance in respect of the subject matter of the VDP application. 

The takeaway

Draft IC00-1R6 proposes some sweeping changes to the administration of the VDP program.  Many of these changes appear to be aimed at limiting the benefits of a program that was viewed by some as an overly generous amnesty program that rewarded non-compliance.

Paradoxically, the decision made by the Minister of National Revenue to restrict access to the VDP may lead to less disclosures and, correspondingly, a reduced level of overall compliance and reduced revenue from the program.

The proposed changes may also have the unintended effect of discouraging the use of the VDP to identify errors and omissions, forcing the CRA to dedicate additional audit resources to identify non-compliance. 

The CRA will be accepting comments on Draft IC00-1R6 until August 8, 2017, and plans to announce changes to the program in the fall of 2017. 


1.  That is, relief from penalties or interest under subsection 220(3.1); see subsection 165(1.2). 



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