Even with your best efforts to remain in compliance with your obligations as a taxpayer, there may be situations where you provide inaccurate or incomplete information on your tax filings or fail to disclose information that is required to report. The Voluntary Disclosure Program encourages taxpayers to voluntarily come forward and correct any errors or omissions.
The VDP applies to disclosures relating to income, source deductions, excise duties and excise taxes including GST/HST. Taxpayers eligible for this disclosure include individuals, employers, corporations, partnerships and trusts. As the disclosure must be voluntarily, you must come forward and report the required information prior to being contacted by the tax authorities. Furthermore, the application will only be considered for relief if it is complete, involves the application or potential application of a penalty, includes information that is at least one year past due and includes payment of the estimated tax owing.
A complete disclosure includes a description of all the facts and circumstances that led to the errors and omissions and corrected tax or information returns for all applicable tax years impacted by the disclosure. The estimated balance owing with respect to the unreported or underreported amounts that have been corrected on these returns must be remitted along with the disclosure. If the disclosure is accepted under the program, you may be eligible for penalty relief and interest relief.
Applications relating to income tax disclosures fall into two tracks: General Program or the Limited Program. The General Program applies to non-willful conduct such as unintentional errors or omissions due to a lack of complete information at the time of filing or a misunderstanding of tax law. Applications accepted under the General Program will be eligible for penalty and interest relief and will not be referred for criminal prosecution due to tax offences. The Limited Program applies to situations where there is an element of intentional conduct. If accepted under this program, you will not be referred for criminal prosecution or be subject to gross negligence penalties. However, other penalties will be charged as applicable and interest relief will not be provided. Applications relating to GST/HST or excise taxes may fall under three categories: wash transactions, the General Program or Limited Program. Wash transactions are transactions in which a taxable supply is made and the supplier did not remit the net tax owing as they did not charge or collect the correct amount of tax, but the recipient is also a GST/HST registrant and would have been entitled to claim an input tax credit for the taxes paid. As each of the supplier, recipient and tax authorities are in the same cash position as they would be if the transaction was completed correctly, 100% interest relief is provided and the other provisions are similar to the General Program. The remaining rules of the General and Limited Program mostly parallel the rules of income tax disclosures.
All disclosures are reviewed on a case-by-case basis. Due to the potential for gross negligence and criminal prosecution with respect to disclosures under the Limited Program, many factors are closely considered. These include the efforts made by the taxpayer to avoid detection, the amount of dollars involved, the number of years of non-compliance, the sophistication of the taxpayer and whether the disclosure was made after an official statement by CRA regarding its intended focus for compliance.
Relief under these programs is at the discretion of the Minister. If the taxpayer feels the Minister has not exercised discretion in a fair and reasonable manner, there may be an opportunity to request a judicial review depending on the facts and circumstances.
You will be informed of the decision in writing including the reasons for the decision as well as the final balance owing, and amount of relief provided. If the application is denied, an investigation or prosecution may be initiated. Once an application has been accepted, it is critical that you remain in compliance with your future obligations. Generally, you can receive relief under this provision only once.
Due to the risks and limitations of this program, it is important to receive proper accounting and potentially legal advice prior to making a submission.
For more information, please contact firstname.lastname@example.org or 1 844-GYTD-CPA