Voluntary Disclosure Program: A Guide

The Voluntary Disclosure Program (VDP) allows taxpayers to come forward and correct inaccurate or incomplete information, or to disclose information not previously reported to the tax authorities. This guide explains the basics of the program, its benefits, and important considerations.

What is the Voluntary Disclosure Program?

The Voluntary Disclosure Program is an initiative by tax authorities that encourages individuals and businesses to voluntarily correct past tax errors or omissions. By participating, taxpayers can avoid prosecution and may benefit from reduced penalties.

Eligibility Criteria

To qualify for the VDP, the disclosure must be voluntary, complete, and involve information that is at least one year overdue. The taxpayer must not be under audit or investigation at the time of disclosure.

Benefits of Voluntary Disclosure

One of the main benefits of the VDP is relief from prosecution for tax offences. In many cases, taxpayers may also receive partial relief from penalties and interest charges.

Process of Making a Voluntary Disclosure

Taxpayers must submit a detailed application outlining the errors or omissions, along with supporting documentation. The tax authority will review the submission and determine eligibility for the program.

Types of Disclosures

The VDP typically covers income tax, GST/HST, and other federal taxes. It does not apply to criminal activities or cases where the tax authority has already initiated enforcement action.

What are the disadvantages of voluntary disclosure?

While the VDP offers significant benefits, there are some disadvantages. Taxpayers are still required to pay any taxes owing, plus interest. In some cases, only partial relief from penalties is granted, and the disclosure process can be complex and time-consuming.

What is the penalty for voluntary disclosure program?

Although the VDP can provide relief from prosecution and reduce penalties, taxpayers may still be subject to some penalties and will be required to pay interest on any outstanding taxes. The exact penalty depends on the circumstances of the disclosure and the policies of the tax authority.

Confidentiality and Legal Considerations

Information provided under the VDP is generally kept confidential. However, there are exceptions, such as when disclosure is required by law or court order.

Conclusion

The Voluntary Disclosure Program is a valuable opportunity for taxpayers to correct past mistakes and avoid severe penalties. However, it is important to understand the requirements and potential drawbacks before proceeding.