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We are pleased to inform you that on September 10, 2025, the Canada Revenue Agency published a new Voluntary Disclosure Policy through Income Tax Information Circular IC00-1R7 and GST/HST Memorandum 16-5-1.

As you may recall, the CRA adopted a very strict position in December of 2017, which has been in effect since March of 2018. Under this approach, all past omissions had to be disclosed and corrected by filing tax returns in order for a voluntary disclosure to be accepted as complete.

In practice, this rigid approach led to several complications, particularly when a large number of years were involved and the amounts in question were not necessarily very high. This led the CRA to make compromises in certain cases and, eventually, to reconsider its position as a whole.

The new position is much more flexible and, to a certain extent, even more flexible than the approach that prevailed before the changes adopted in December of 2017.

Of course, the new Circular contains general comments, and we will have to see how they are applied in practice to fully understand their true scope.

However, it is undeniable that the new Program contains significant relaxations. For example, we would like to draw your attention to the following relaxations:

a) Under paragraph 10 of the Circular, it will no longer be necessary for the subject matter of the voluntary disclosure to be an item that would have resulted in a penalty if it had been discovered by the tax authorities.

We do not yet know the scope of this change, but it is reasonable to assume that it could allow for certain corrections of a more technical nature to be made through the Voluntary Disclosure Program, under conditions that remain to be specified.

b) The concepts of “Limited Program” and “General Program” are abandoned and replaced by the new concepts of “Unprompted Voluntary Disclosure Application” and “Prompted Voluntary Disclosure Application”.

c) Under the old system, penalties other than gross negligence penalties could continue to be imposed under the “Limited Program”.

d) Under the new Program, penalties will be waived for “Unprompted Voluntary Disclosure Application” and “up to 100%” of penalties may be waived for “Prompted Voluntary Disclosure Application”.

e) The other difference will be in the proportion of interest that will be eliminated, i.e., 75% for “Unprompted Voluntary Disclosure Application” and 25% for “Prompted Voluntary Disclosure Application” all subject to the ten-year limits contained in the provisions of tax laws that allow for the reduction or cancellation of interest.

f) Paragraph 17 of the Circular seems to suggest that it may be possible to initiate a voluntary disclosure during an audit if there is no connection between the audit and the disclosed information.

g) A voluntary disclosure request will be considered “unprompted” in either of the following circumstances:

• No communication has been made by the tax authorities to the taxpayer or related parties.
• The taxpayer has received an “educational letter or notice that provides general advice or information on filing returns related to a particular subject”.

h) A request will be considered possible, but “prompted” in either of the following circumstances:

• The taxpayer has received oral or written communication about a known compliance issue related to the disclosure, including letters or notices that identify a specific error or omission in the taxpayer's account or grant a deadline to correct an error or omission.
• if the CRA has already received information from third party sources regarding the possible involvement of a taxpayer or a person related to the taxpayer in a tax non-compliance matter.

i) The CRA may reject the voluntary disclosure if other non-compliance issues arise that were not included in the voluntary disclosure.

j) The officer handling the voluntary disclosure may seek assistance from specialized audit teams, particularly if the subject matter of the voluntary disclosure is complex or technical in nature.

k) Finally, in general, Paragraph 27 of the Circular provides that amended returns will be required for a period of six years in general and ten years in the case of assets or income located outside Canada.

l) Paragraph 28, on the other hand, provides that the CRA retains the discretion to request information for additional years, without specifying at this time what parameters will guide it in deciding to require additional years.

m) However, paragraph 37 of the Circular provides as follows:

"(...) Subject to the applicable limitation rules, additional tax assessments may be issued for any taxation year following an examination by another CRA sector. In addition, if the CRA finds that there is fraud or misrepresentation due to negligence, carelessness, or wilful omission, an assessment may be made at any time for any taxation year to which the fraud or misrepresentation relates, and not only for the years included in the VDP application."

n) However, paragraph 37 does not specify whether the fraud or misrepresentation referred to is fraud or misrepresentation in the voluntary disclosure itself or in the taxpayer's tax situation prior to the voluntary disclosure that gave rise to it.

o) With respect to GST, the Memorandum refers to the production of documents for a period of four years, with the same nuances.

The new federal Circular and Memorandum will come into effect on October 1.

The Circular and Memorandum are currently under review by Revenu Québec, which will announce its position at a later date.

At this stage, however, it is reasonable to assume the following:

1) Revenu Québec will continue to scrutinize the past and tax “unexplained capital”, particularly in voluntary disclosures involving foreign accounts;

2) The assessment period will usually be at least ten years for GST and QST in cases involving taxes collected but not remitted.