Revised CRA voluntary disclosure program represents taxpayer-friendly shift

The Canada Revenue Agency (CRA) introduced a major update to its voluntary disclosure program as part of its evolving approach to tax compliance and enforcement. The new framework, outlined in information circular IC00-1R7, replaces IC00-1R6 as of Oct. 1, 2025 and reflects the CRA’s increased focus on early intervention and education to promote compliance as confirmed in its 2025-2026 departmental goals. These changes present opportunities and challenges for tax practitioners when advising clients on correcting past non-compliance.

While the core principles of the CRA’s voluntary disclosure program (VDP) remain unchanged, the new framework outlined in IC00-1R7 offers more generous relief, broader eligibility and expanded tax coverage.

This should allow more taxpayers to utilize the VDP to correct non-compliance—but the CRA continues to hold immense discretion on how it applies to this program. The way the CRA processes applications and applies relief under the new program also remains to be seen.

Tax practitioners should familiarize themselves with the new program to ensure their application meets all the criteria to ensure clients receive the maximum benefit available.

Businesses can also consult with the appropriate advisors to effectively navigate future updates to the CRA’s compliance tools.

Restructured application streams 

Restructuring the VDP’s application streams is one of the key changes under IC00-1R7.

Previously, taxpayers could apply under IC00-1R6’s general or limited programs; the general program offered full penalty relief and partial interest relief, while the limited program only provided relief from gross negligence penalties.

IC00-1R7 replaces these programs with unprompted and prompted application streams.

Taxpayers who did not contact the CRA regarding their compliance issue can submit an unprompted application. This stream is designed to encourage proactive compliance before any CRA intervention occurs.

Conversely, taxpayers can submit a prompted application after the CRA initiates some form of contact, such as an education letter or compliance reminder. This stream would provide taxpayers more limited relief, but it’s still welcome as it recognizes that not all CRA contact should automatically disqualify a disclosure.

Penalty and interest relief

Relief continues to be limited to the past 10 taxation years, but the new provisions are generally more generous. 

Here is how the two frameworks compare:

• IC00-1R6: 
• General program: Full penalty relief, 50 per cent interest relief—excluding the three most recent years.
• Limited program: Relief from gross negligence penalties only, no interest relief.
• IC00-1R7: 
• Unprompted application: 100 per cent penalty relief, 75 per cent interest relief.
• Prompted application: Up to 100 per cent penalty relief, 25 per cent interest relief.
• No gross negligence penalties under either stream.

Redefining voluntariness

IC00-1R7 also updates what voluntariness entails to better reflect real-world interactions between taxpayers and the CRA.

Under IC00-1R6, any form of CRA contact—including broad-based correspondence—would disqualify an application if the disclosure and the subject matter of the letter are the same.

IC00-1R7 introduces a more practical standard. Taxpayers under audit or investigation remain ineligible if the subject matter under investigation is the same as the non-compliance being disclosed.

However, education letters and general compliance communications no longer automatically disqualify an application under the prompted stream.

This allows more taxpayers to qualify for relief and gives practitioners more flexibility in advising clients whom the CRA previously contacted.

Eligibility criteria

IC00-1R7 broadens the eligibility criteria to include applications involving penalties, interest or both.
This subtle but important update from the previous framework allows more taxpayers to seek relief under the program.

Additional eligibility requirements mimic the old program and include the following criteria:

• The disclosure must relate to a tax year at least one year past due.

• The application must disclose all known errors and omissions in its tax obligations and provide supporting documentation as noted below.

• Payment or proposed payment plan of estimated tax owing.

IC00-1R7 also removes the gross revenue threshold of $250 million for corporate applicants—a notable development that reflects a shift towards taxpayer-friendliness. Under the old program, corporations exceeding this threshold were automatically considered under the limited program.

Documentation and filing requirements

New documentation standards that emphasize completeness and consistency are another key part of IC00-1R7. Tax practitioners must ensure clients are prepared to meet these requirements before applying.

Form RC199 is now mandatory for applicants, albeit in simplified form. Applicants must answer whether they received assistance from any other individual in respect of the subject matter of the disclosure.

This allows the CRA to track whether there are tax professionals who consistently promote such non-compliance.
Applications must also include six years of documentation for Canadian-sourced income or 10 years for foreign income or assets.

However, applicants are still required to disclose all known errors and omissions in their tax obligations. The CRA also retains discretion to request additional documentation for tax years beyond the above timeframes as well as specific records, books of account or other supporting evidence.

Where books and records do not exist, taxpayers must make all reasonable efforts to provide estimates. This is a change from the previous program, where taxpayers needed to provide estimates at the time of filing.

Failure to provide the required information within the timeframes given by the CRA may result in denial of the application. Applications could also be denied if the CRA learns of any other issues of non-compliance not originally included in the disclosure.

Practitioners should also note that subsequent tax assessments may arise for any tax year following a review by another area of the CRA, subject to certain limitations.

If the CRA finds fraud or misrepresentation due to neglect, carelessness or willful default, an assessment may be issued for any tax year to which the fraud or misrepresentation relates—not just those years included in the VDP application.

Expanded scope of taxes

The revised VDP expands the types of taxes covered, making it more relevant for a broader range of clients.
While IC00-1R6 and IC00-1R7 include income tax, GST/HST, excise duties and source deductions, the new framework adds the following tax categories:

• Luxury tax

• Underused housing tax

• Global minimum tax

• Other emerging tax obligations

This expansion is particularly important for high-net-worth individuals and entities with complex tax profiles.

Defining taxpayer

In its framework, IC00-1R6 defined taxpayer to include individuals, corporations, partnerships, trusts and employers. However, IC00-1R7 omits a formal definition—which could lead to interpretive ambiguity.

Practitioners should monitor how CRA interprets this omission in practice.

Looking ahead

The transition from IC00-1R6 to IC00-1R7 marks a significant development in the CRA’s approach to voluntary compliance.

Despite the updates, some elements remain consistent—including the understanding that pre-disclosure discussions remain informal, anonymous and non-binding.

Subsequent applications could be considered if the subject matter differs or was beyond the taxpayer’s control. This could allow for more applications under IC00-1R7; under the previous program, both criteria needed to be met.