CRA Voluntary Disclosure Program (VDP) 2025 Update: What Taxpayers Need to Know
Introduction: Why the Voluntary Disclosure Program Matters
If you’ve fallen behind on taxes, failed to file T1135 foreign asset forms, or missed GST/HST returns, the CRA Voluntary Disclosure Program (VDP) offers a path to correct past mistakes while avoiding harsh penalties and prosecution. For many years, though, the definition of “voluntary” was so restrictive that taxpayers were denied relief for reasons that had nothing to do with audits or investigations.
The new Information Circular IC00-1R7, effective October 1, 2025, changes that. It simplifies the program, restores fairness, and provides meaningful relief for Canadians who want to get compliant.
At Dexado, led by Boris Davidkov, CPA and ex-CRA auditor, we specialize in guiding clients through this program, ensuring their disclosures are strategic, complete, and positioned for maximum relief.
The Old Problem: CRA’s Harsh “Voluntary” Standard
Under the previous rules, CRA often rejected applications as “not voluntary” in situations that had nothing to do with enforcement. For example:
- Letters sent by CRA’s Non-Filer program demanding a taxpayer (or their spouse or children) to file overdue T1 or GST/HST returns.
- Cases where the taxpayer never even received the letter or the letter never appeared in their CRA online account.
- Notices that clearly did not come from the audit or investigations division, but were still treated as a bar to the program.
This interpretation was widely criticized as unfair and counter-productive. Taxpayers who genuinely wanted to fix past mistakes were turned away because of administrative notices, even though they weren’t under audit or investigation.
The New Rules: IC00-1R7 Simplifies Eligibility
The updated IC00-1R7 resolves this by drawing a clear line between education letters, non-filer notices, and actual audits or investigations.
Here’s how it works now:
| Scenario | Old Policy (Pre-Oct 1, 2025) | New Policy (IC00-1R7, Oct 1, 2025 onward) |
| Education letter (general filing reminder) | Often treated as “prompted” or disqualifying | Considered unprompted → 100% penalty relief + 75% interest relief |
| Non-Filer / Demand to File letter (with a deadline to file specific returns) | Application often denied as “not voluntary” | Considered prompted, but still eligible → 100% penalty relief + 25% interest relief |
| CRA audit or investigation | Always disqualified | Still disqualified |
| Investigations by other authorities (RCMP, securities commissions, FINTRAC, provincial tax authorities) | Not always clear | Now explicitly disqualifying if related to the disclosure issue |
| Unprompted self-disclosure | Eligible but subject to CRA interpretation | Clearly eligible → 100% penalty relief + 75% interest relief |
Key takeaway: receiving a non-filer or demand-to-file letter no longer blocks you from the VDP. It makes your application “prompted” instead of “unprompted,” which means you’ll get full penalty relief and partial interest relief (25%). That’s a major improvement over being denied entirely.
Relief Levels: Prompted vs. Unprompted
- Unprompted Applications
- 100% penalty relief
- 75% interest relief
- Protection from prosecution
- Prompted Applications
- 100% penalty relief
- 25% interest relief
- Protection from prosecution
Both categories represent significant savings compared to waiting for CRA to assess penalties, interest, and potential prosecution.
The Catch: What Still Disqualifies a Disclosure
The application is not voluntary if there is already:
- A CRA audit or investigation underway related to the information you want to disclose.
- An investigation or audit by another law enforcement or regulatory agency (e.g., RCMP for fraud, FINTRAC for money laundering, a provincial securities commission, or provincial tax authority).
This distinction matters: even if CRA hasn’t contacted you, outside enforcement activity can still bar your disclosure.
Why This Matters for Taxpayers
For many clients, the fear of rejection under the old rules kept them from coming forward. Now, with IC00-1R7:
- Fairness is restored – harmless non-filer letters or reminders no longer shut you out.
- Relief is more predictable – taxpayers know whether they’ll fall under unprompted or prompted.
- Applications are easier – CRA has introduced a streamlined electronic application process.
If you’ve missed T1135 filings, misclassified GST/HST, or left returns unfiled for years, now is the time to act.
How Dexado Helps: Ex-CRA Advantage
At Dexado, we don’t just file forms—we strategize disclosures to maximize relief and protect your interests.
- Ex-CRA Expertise: With Boris Davidkov’s background as a CRA auditor, we know how disclosures are reviewed and how to structure them for success.
- Scope Management: We help you include all years and issues that must be reported while ensuring clarity and completeness.
- Relief Maximization: We identify which parts of your disclosure may still qualify as unprompted (for higher interest relief) and which are prompted.
- Audit Protection: If CRA pushes back, we defend your file with insider knowledge of how auditors think.
Our success rate in handling complex VDP cases is built on knowing where the line is drawn between prompted vs. unprompted—and ensuring our clients stay on the right side of it.
Conclusion: Act Now, Before CRA Calls You
The new IC00-1R7 is good news for taxpayers. It softens the harshness of the old rules, ensures fairer treatment, and gives Canadians a real chance to correct past mistakes without being shut out by administrative letters.
But timing matters. The moment CRA or another enforcement agency initiates an audit or investigation, your chance to apply is gone.
If you have unfiled tax returns, undisclosed foreign property, or GST/HST reporting errors, now is the time to act.
Book a confidential consultation with Dexado today.
We’ll review your situation, explain whether your disclosure would be treated as unprompted or prompted, and guide you through every step of the process.
