Tightening of the Voluntary Disclosures Program
Through the Voluntary Disclosures Program (“VDP”), taxpayers can make an application to correct inaccurate or incomplete information, or to disclose information not previously reported. For example, taxpayers may not have met their tax obligations if they claimed ineligible expenses, did not file an information return (such as T1135), or underreported their income. The VDP gives you a second chance to change a tax return you previously filed or to file a return that you should have filed. You can apply to the Canada Revenue Agency (CRA) to ask for relief of prosecution and penalties.
The CRA considers that the voluntary disclosure program has been used by certain wealthy individuals and corporations as a way to avoid the consequences related to their aggressive tax planning. On December 15, 2017, Minister of National Revenue, announced changes to the VDP to tighten the eligibility criteria to access the program. The new program will limit the taxpayer’s ability to ask for relief of penalties. If you wish to correct your past filing deficiencies or errors under the old rules, contact us immediately! The clock is ticking.
Beginning March 1, 2018, a limited program will apply to taxpayers who have intentionally avoided their tax obligations. To determine if taxpayers have intentionally avoided their tax obligations, the CRA will consider a number of factors, including, but not limited to: whether efforts were made to avoid detection through the use of offshore vehicles or other means, the total dollar amounts involved, the number of years of non-compliance, as well as the sophistication of the taxpayer. The formal changes to the VDP will:
create a new Limited Program, which will offer more limited relief to taxpayers who have intentionally avoided their tax obligations;
require payment of the estimated taxes owing as a condition to qualify for the program – this payment was not required in the past;
cancel relief if it is subsequently discovered that a taxpayer’s application was not complete due to a misrepresentation; and
eliminate the process for taxpayers and authorized representatives to make disclosures on a no-names basis.
The revised policy reiterates that the CRA will continue to restrict participation in the VDP if it has already received information on a taxpayer’s (or a related taxpayer’s) potential involvement in tax non-compliance–for example, a leak of offshore financial information such as the Paradise Papers, or other information that names the taxpayer. Again, the clock is ticking. If you wish to correct your past filing deficiencies or errors under the old rules, contact us immediately!
If you have any questions or comments about this blog post, please feel free to contact us.
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