On September 10, 2025, the Canada Revenue Agency (CRA) released Information Circular IC00-1R7[1] and GST/HST Memorandum 16-5-1,[2] which together outline a restructured Voluntary Disclosures Program (VDP) that overall appears to be aimed at encouraging voluntary compliance. The new rules take effect for applications received on or after October 1, 2025. The CRA's guidance simplifies the application process, broadens eligibility, and offers new levels of relief for taxpayers correcting unintentional filing mistakes. This reform replaces the prior bifurcated model (“General” and “Limited” streams) with a new binary classification:

• Unprompted Applications: Those made prior to any CRA communication identifying a specific compliance issue. General outreach, educational materials, or generic reminders do not constitute such contact. These applications are normally eligible for 100% penalty relief and 75% interest relief.
   
• Prompted Applications: Those made after the CRA has initiated contact with the taxpayer (or a related party) regarding a specific error or omission or has obtained third-party information indicating potential noncompliance. These applications are normally eligible for up to 100% penalty relief and 25% interest relief.

Under the prior circular, interest relief was entirely unavailable in the Limited stream and capped at 50% in the General stream. The revised framework offers significantly greater relief for early disclosures, providing up to 75% interest relief and full penalty relief. It aligns with the CRA’s discretionary authority under subsection 220(3.1) of the Income Tax Act (Canada)[3] and section 281.1 of the Excise Tax Act (Canada).[4]

GST/HST Disclosures: Continued Relief for Wash Transactions

Alongside the release of IC00-1R7, the CRA updated GST/HST Memorandum 16-5-1, affirming that wash transactions remain eligible for relief under the VDP. Wash transactions occur when GST/HST was not properly collected, but the recipient was entitled to a full input tax credit (ITC), or certain situations where the wrong entity in a closely related group, or an associated entity erroneously claimed an ITC—resulting in no net loss to the CRA. Wash transactions within a VDP application will continue to receive 100% relief of the applicable penalties and interest. Eligibility for any other GST/HST voluntary disclosure is now assessed under the same Prompted vs. Unprompted framework.

Expanded Eligibility and Lower Documentation Requirements

The CRA has eliminated exclusions that previously restricted access based on gross revenue thresholds or repeat participation. Previously, entities with revenues exceeding $250 million were presumptively confined to the Limited stream, and second disclosures were permitted only in exceptional circumstances, and repeat applications are permitted where the subject matter differs or arises from circumstances beyond the taxpayer’s control. These barriers have been removed.

Supporting documentation (such as returns, forms, statements, and schedules) is now only required for the six tax years with Canadian-source noncompliance, 10 years for foreign-source issues, and four years for GST/HST VDP cases with actual errors or omissions, as compared to any year forming part of the disclosure under the prior circular. While the CRA may request additional details at its discretion, this default approach streamlines the process and better aligns disclosure requirements with the scope of noncompliance.

Refined Enforcement Triggers

The CRA has clarified what constitutes disqualifying contact. General outreach, educational materials, and reminder notices no longer trigger Prompted classification. Only targeted compliance actions, such as audits, investigations, or formal demands constitute enforcement. This refinement reduces inadvertent disqualification and encourages proactive engagement without penal exposure.

Codified Relief and Procedural Streamlining

Relief parameters are now more codified, replacing the prior discretionary and inconsistently applied interest waivers. The mandatory use of Form RC199 establishes a clear evidentiary record of disclosure timing and ensures completeness at submission. This procedural standardization enhances administrative efficiency and promotes consistent treatment across files.

Scope of Taxes

Since the last update to the VDP guidelines, there have been some new tax regimes and statues that have since been enacted which were not previously covered. The CRA has now expanded the VDP to expressly include these additional statutes and tax regimes. The expansion now includes, but is not limited to, the Underused Housing Tax Act, Select Luxury Items Tax Act (Luxury Tax), the Global Minimum Tax Act. This change demonstrates CRA’s willingness to adjust the VDP such that the VDP is harmonized with evolving changes with the Canadian tax regime, which broadens the kind of taxes and issues for which the VDP relief may be available.

Waiver Rights

Under the Limited Program, taxpayers were required to waive their right to object or appeal any reassessments resulting from the VDP. This was a condition of receiving limited relief. For the General Program, there was no waiver requirement—full objection/appeal rights remained. The CRA has now eliminated the waiver requirement entirely. All taxpayers retain their objection and appeal rights, regardless of whether they are in the Prompted or Unprompted relief categories.

How Can A&M help?

The revised VDP framework reflects a policy shift toward increased flexibility and broader access to relief, reinforcing the CRA’s emphasis on voluntary compliance. Taxpayers seeking to navigate these changes or assess their eligibility under the new circular are encouraged to contact us at A&M. Our team brings deep experience in complex VDP matters and is well-equipped to deliver strategic, tailored guidance to your specific circumstances. A&M can support with:

• Eligibility Assessments
  • We analyze your specific fact pattern—including timing and applicable statutes—to determine whether your disclosure qualifies for Unprompted or Promoted relief under the new framework.
• Risk Management and Strategic Guidance for Complex Cases
  • We help you assess the tax costs and strategic benefits of filing under the VDP and provide tailored disclosure strategies.
• Preparation and Submission of Form RC199
  • We can prepare your VDP application, including supporting tax returns, forms, and documentation.
• Representation and CRA Liaison
  • We communicate with the CRA on your behalf, manage follow-up requests, and support you through reviews, audits, or further assessments arising from the disclosure.

[1] “IC00-1R7 Voluntary Disclosures Program,” Canada Revenue Agency, September 10, 2025.

[2] “Voluntary Disclosures Program (Applications Received On or After October 1, 2025),” GST/HST Memorandum 16-5-1, Canada Revenue Agency, September 2025.

[3] Justice Laws Website, “Income Tax Act,” last amended June 27, 2025.

[4] Justice Laws Website, “Excise Tax Act,” last amended June 2, 2025.