The CRA’s New Voluntary Disclosure Program Or VDP
Effective March 1, 2018, CRA made changes on the Voluntary Disclosure Program or short for VDP, and the levels of penalty and interest relief available under the new VDP.
Elimination of No-Name Disclosures
Under the new VDP, a taxpayer is able to start preliminary discussions on a no-names basis with the CRA; however, the discussions will be non-binding in nature. The intention is to provide the taxpayer with preliminary information such as the risks of non-compliance and the possible relief.
Under the New VDP, the taxpayer’s Effective Disclosure Date will be the date on which the taxpayer files the new VDP form providing detailed information including the taxpayer full identities. Additionally, a taxpayer will be required to disclose the name of any consultant or other service providers who provided assistance in respect of the disclosure.
Tax Payment is Now Required
Under the old VDP, a disclosure must be voluntary, complete, report is at least one year past due and involve the a penalty in order qualify as a “valid disclosure” that is eligible for relief.
The new VDP adds a fifth requirement for a “valid disclosure”, meaning that the disclosure must also include payment of the estimated taxes owing to qualify.
When a taxpayer is unable to pay the estimated taxes owing in full, a payment arrangement must be made to address the tax debts supported by evidence of the taxpayer’s income, expenses, assets and liabilities.
General and Limited Programs
Under the new VDP, there will be two categories of disclosures: the “General Program” and the “Limited Program”.
General Program
- The taxpayer will be eligible for penalty relief and will not be subject to prosecution
- The CRA may grant partial interest relief (generally 50%) in respect of taxation years before the three most recent taxation years.
Limited Program,
- The taxpayer will not be subject to prosecution.
- Penalty relief will be limited to gross negligence penalties.
- Other penalties still apply.
- The taxpayer will be ineligible for interest relief.
- The taxpayer will be required to waive objection except for mistakes in math or categories.
Additional Restrictions
CRA put additional restriction on under the new VDP. To just name a few:
- Corporations with gross revenue in excess of $250 million in at least two of the last five taxation years
- Persons who are in receivership or have become bankrupt
- Unreported income or taxes from the proceeds of crime; etc.
Since CRA only allows taxpayers to utilize the VDP program once in their life time. Canadian taxpayers are all faced with more strict conditions and much higher risks when considering VDP to get protection from prosecutions, penalties and interests. It is thus more important than ever to make sure every step is done properly and professionally so they do not lose the only opportunity to correct their mistakes.
When dealing with the VDP, experience does matter. We have helped many clients, who were in serious tax troubles such as misreported foreign assets, under-reported income, over claimed credits, late tax filings, etc. to get the settlement and protections. We can do the same for you.
Contact us at 866-611-6482 or click to complete the Contact Form now for a free consultation!