• by admin
• February 18, 2023

Voluntary Disclosures Program (VDP) in Canada: How to Disclose Unreported Income and Seek Relief from Penalties

 

Canada Revenue Agency encourages taxpayers to rectify their mistakes and file or report unfiled taxes or disclose information under VDP. CRA applies this program to be fair to you but not to award you for the non-compliance or mistakes. 

Filing under the Voluntary Disclosures Program is only available for the past ten years. 

The following items are generally covered under the Voluntary Disclosures Program. 

• Unfiled tax returns up to the last 10 years 
• Failure to report or under reported a taxable income in Canada or from foreign sources 
• If you have claimed ineligible expenses 
• Failure to remit payroll remittances 

• Failure to file an information return such as “Reporting foreign property” – CRA charges you $25 per day penalty to a maximum of $2,500 per year if you fail to report your foreign properties, which were more the $100,000. 

This article only applies to matters related to your income tax and payroll source deductions for individuals, corporations, partnerships, and trusts. Under this program, you can correct any mistakes, file your late unfiled taxes, or disclose information. 

If your filing under this program is accepted by the Canada Revenue Agency, you can seek relief from penalties and partial relief from interest. However, if CRA finds that something was intentionally not done or there is a related party transaction, or gross revenue exceeds $250 million, then CRA may limit your relief. Relief from interests is only available to tax returns that are before the three most recent years, and the maximum relief that could be allowed is 50% of the interest payable. 

You need to meet the following conditions in your Voluntary Disclosures Program application: 

• Your disclosure is voluntary. You are applying after you have already received an enforcement letter. 
• Your application is complete in all respect. 
• You have penalties owing for unpaid taxes or unreported information. 
• Information in your application includes a piece of information that is at least one year past due. 

• You include your estimated tax payment. 

 

RKB Accounting has expertise in cross-border taxation and has been providing accounting and taxation services for the last fifteen years in Canada and USA. RKB services include incorporating a business on both sides of the border, bookkeeping, sales tax, payroll, and corporate and personal income tax. RKB’s expertise includes cross-border tax planning, long-term tax planning, helping business start-ups, business structure planning, and resolving complex tax matters.

Disclaimer: Information in the blog/post/article has been presented for a broad and simple understanding. This is not legal advice. RKB Accounting & Tax Services does not accept any liability for its application in any real situations. You need to contact your accountant or us for further information.