Voluntary disclosure program in Canada (or in short or VDP Canada) is administered by the CRA. It allows taxpayers to revise or amend their previous tax filing returns while revealing fresh information to the CRA that was not provided earlier in their tax returns. The purpose of VDP Canada is to make the taxpayers come clean and come forward on their own accord to correct their tax returns without the apprehension of any criminal prosecution. It gives them a shot at reducing the likelihood of extra penalty charges that may be applied to the tax amounts that they owe to the Canadian government.
However, it is not compulsory that once a taxpayer is accepted into VDP Canada, his or her penalty charges will not be applied. There is no guarantee for the acceptance. In few cases, the additional penalties are charged even after the application into the VDP Canada program and this is as per the discretion of the CRA. All applications that are made to the CRA in connection with the voluntary disclosure program may not necessarily be accepted. There are few requirements that have to be met for the CRA to accept the taxpayers’ voluntary disclosure so that the benefits could be applied to their returns. The benefits will be translated in terms of waiver of criminal charges and reduction of penalties. This is left totally to the discretion of the VDP Canada agent and his or her authorization. It is this agent who decides whether or not the total requirements before disclosing voluntarily have been met so that the disclosure could be declared valid.
When the CRA accepts a voluntary disclosure after it meets all the per-requisite conditions, it is deemed a valid disclosure. The taxpayer will not face prosecution and possible penalties with respect to the voluntary disclosure. All requests are treated and reviewed on their own merit. The CRA will give full explanation to the taxpayer if the relief is partially granted or if it is wholly denied.
Before making a voluntary disclosure under the VDP Canada program, it is important to take the expert advice of tax professionals. The last thing you would like to expect as a taxpayer is to be accepted into the voluntary disclosure program only to be informed that the penalty charges are going to be waived only partially or not waived in entirety. Tax consultants are in a position to guide the taxpayers as to what they can expect from the disclosure proceedings.
Sometimes, you may have to take a decision on whether it is prudent to participate in VDP Canada program in the first place. It is better to go through all issues and address your concerns as taxpayers to the professional tax consultants before taking any steps.
There could be five possibilities after a voluntary disclosure is made to the CRA:
- Possible criminal prosecution charges could be waived.
- Interest charges and penalties could be waived partially after an investigation.
- The agent could send a notice of denial stating that the application was denied.
- The agent could send the disclosed information in the voluntary disclosure to another CRA department.
- An assessment could take place as a result of the disclosed information.