How does the CRA Voluntary Disclosures Program work since the October 2025 changes?
Since October 1, 2025, the CRA Voluntary Disclosures Program gives unprompted applications 75% interest relief and 100% penalty relief, and prompted ones 25% interest relief and up to 100% penalty relief, under IC00-1R7. File Form RC199 before any audit starts, for a year at least one year past due, with payment of the estimated tax.
Unprompted and prompted relief side by side
IC00-1R7 applies to every application the CRA received on or after October 1, 2025, and it sorts each one into a relief level based on whether the CRA had already raised the issue canada.ca. The old General and Limited programs are gone.
| What the CRA relieves | Unprompted (general relief) | Prompted (partial relief) |
|---|---|---|
| Interest | 75% of applicable interest | 25% of applicable interest |
| Penalties | 100% of applicable penalties | Up to 100% of applicable penalties |
| Gross negligence penalties | Not applied | Not applied |
| Referral for criminal prosecution | No | No |
| Typical trigger | No CRA contact on the issue, or only an education letter | A CRA letter naming the error, a correction deadline, or third party information |
Both levels carry the same supplemental relief: no criminal prosecution referral and no gross negligence penalties on what was disclosed canada.ca. The tax itself is never relieved. Your client pays all of it, plus the 25% or 75% of interest that isn't forgiven.
GST/HST disclosures follow the same split under GST/HST Memorandum 16-5-1, and an eligible wash transaction gets 100% of penalties and interest relieved canada.ca.
What makes an application prompted
The CRA normally treats an application as unprompted when there's been no verbal or written communication about an identified compliance issue tied to the disclosure. An application that follows an education letter, or a notice that only offers general guidance, still counts as unprompted canada.ca.
It's prompted when it follows a letter or notice that identifies a specific error or omission, or sets a deadline to correct one. It's also prompted when the CRA has already received third party information about possible noncompliance by your client or a related party.
That last trigger is the one that catches people. Your client may never have received a letter, and the application can still land at 25% interest relief because a bank, a foreign tax authority or another source reported first. You won't know until the decision letter arrives, so don't promise a client the 75% level.
Prompted applicants are now eligible, which they weren't before. The CRA still restricts the program for anyone under audit or investigation and for taxpayers who were egregiously noncompliant canada.ca.
The five conditions, and who is shut out
An application qualifies only if it meets all five conditions in IC00-1R7 canada.ca:
| Condition | What it means in practice |
|---|---|
| Voluntary | No audit or investigation has started on your client or a related taxpayer about the disclosed information, including by police, a securities commission or another regulator |
| Complete | Every supporting document is attached, and your client answers CRA requests fully and on time |
| Involves a penalty | The error or omission carries interest, a penalty, or both |
| At least one year past due | The information relates to a tax year at least one year past its filing due date |
| Includes payment | Payment of the estimated tax owing, or a request for a payment arrangement, goes in with the application |
A payment arrangement request isn't automatic approval. Collections reviews every request, and the CRA doesn't guarantee it.
The program also refuses some files outright. A return that produces a refund or owes nothing, a request to cancel penalties or interest already assessed, a request to make or change an election, years covered by an insolvency event, matters under an advance pricing arrangement and matters that depend on a discretionary competent authority agreement are all ineligible.
Worked example: what each level saves
Say your client discloses unreported Canadian rental income. The reassessment would show $20,000 of tax, $6,000 of arrears interest up to the effective date of disclosure and $4,000 of penalties. Assume the prompted file gets the full 100% of penalty relief, which is the best case for that level.
| Line | No VDP | Unprompted | Prompted |
|---|---|---|---|
| Tax | $20,000 | $20,000 | $20,000 |
| Interest | $6,000 | $1,500 (25% kept) | $4,500 (75% kept) |
| Penalties | $4,000 | $0 | $0 |
| Total owed | $30,000 | $21,500 | $24,500 |
| Saved versus no VDP | $0 | $8,500 | $5,500 |
Being prompted costs this client $3,000 of interest. Relief also stops at the effective date of disclosure, the date the CRA gives once it receives and acknowledges the application canada.ca. Sending the estimated tax with the RC199 limits the interest that builds up while the file sits in review. For the rate that interest runs at, see the CRA rate on overdue taxes.
Filing Form RC199
Every application goes in on Form RC199, Voluntary Disclosures Program (VDP) Application, which the CRA simplified for the October 2025 changes canada.ca. Send it through Submit documents online in My Account, My Business Account or Represent a Client, or by mail or fax to the Shawinigan National Verification and Collections Centre.
Name everyone who advised on the disclosure on the form, tax professionals included. For multiyear problems, attach documents for the most recent six years for Canadian sourced income or assets, ten years for foreign income or assets, and four years for GST/HST. Years with no error can be left out, though the CRA may ask for older ones canada.ca.
Not sure the file belongs in the program? Your client can hold preliminary discussions with the CRA on an anonymous basis first. They are informal and don't bind the CRA.
Relief has an outer limit in ITA subsection 220(3.1): the Minister can act only up to ten calendar years after the end of the tax year laws-lois.justice.gc.ca. In practice, interest relief reaches back to interest that accrued in the ten calendar years before the year your client applies, and penalty relief to tax years ending in that window
canada.ca. Foreign asset files like a missed T1135 often run past it.
Files sent before October 1, 2025, and disputes
Applications the CRA received before October 1, 2025 are still decided under IC00-1R6 (and GST/HST Memorandum 16-5), even if the decision comes later canada.ca. Those files run on the old two track rules in the archived circular
canada.ca.
| Program under IC00-1R6 | Interest relief | Penalty relief |
|---|---|---|
| General Program | 50% of interest for years before the three most recent required returns; full interest on those three | No penalties |
| Limited Program | None | Gross negligence penalties waived; other penalties apply |
A decision can't be appealed by objection: subsection 165(1.2) bars objecting to relief decisions under 220(3.1) canada.ca. Ask in writing for a second administrative review first. After that, a judicial review application goes to the Federal Court under section 18.1 of the Federal Courts Act within 30 days of the date the CRA sent the decision
canada.ca.
Sources
Can my client still apply after getting a CRA education letter?
Yes, and it normally stays unprompted. IC00-1R7 treats an application after an education letter or general guidance notice as unprompted, so it qualifies for 75% interest relief and 100% penalty relief canada.ca. A letter naming a specific error, or setting a deadline, makes it prompted.
Can a client use the VDP twice?
Sometimes. After relief is granted your client is expected to stay compliant, and the CRA will consider a second application only when the circumstances were beyond their control or the second disclosure concerns a different matter canada.ca.
Does the VDP cover a missed election or a late refund return?
No. Requests to make or change an election and returns that produce a refund or owe nothing are on the ineligible list in IC00-1R7. A late election needs its own relief route, and a refund return can simply be filed.
What happens if the CRA finds something I left out?
The application can be denied. IC00-1R7 lets the CRA deny relief when it finds other noncompliance not included in the disclosure, or when requested information isn't provided in time, and where it finds fraud or misrepresentation it can assess any tax year canada.ca.
General information for the tax year shown, not advice for a specific client. Confirm the facts before you file or remit.