The Canada Revenue Agency (CRA) recently provided administrative guidance on the operation of the Voluntary Disclosures Program (VDP) in a national webcast with the Society of Trust and Estate Practitioners (STEP) Canada on June 18, 2026, followed by a Q&A session. The CRA’s comments clarify how it is applying the revised VDP policy under Information Circular IC00-1R7 (effective October 1, 2025), particularly in assessing whether a disclosure remains voluntary and whether it is characterized as prompted or unprompted.
These distinctions are central to determining whether access to the VDP remains available and the level of relief that may be obtained.
When is a Disclosure “Voluntary”?
Under the previous policy, relatively low threshold CRA contact (such as a request for information or a broad educational letter) could be sufficient to disqualify a disclosure. The updated policy instead focuses on whether the CRA has initiated an audit or investigation - that is, whether significant compliance work on the specific issue has already begun.
An “audit” generally refers to a formal review carried out by an auditor. An “investigation” includes other compliance activities involving active work by the CRA on a specific issue concerning a specific taxpayer.
The central distinction is therefore between:
- general or informational CRA contact, which does not prevent access to the VDP; and
- targeted compliance activity directed at a specific taxpayer and issue, which may preclude a disclosure in respect of that issue.
This distinction reflects the position of the VDP earlier along the CRA’s broader compliance continuum, before the assessment or reassessment stage. The VDP allows the CRA to decide whether penalties and interest should apply before the information is assessed and/or significant resources have been dedicated to addressing the non-compliance.
Voluntariness is Issue-Specific, Not File-Wide
Voluntariness is assessed on an issue-specific basis rather than at the taxpayer level. An audit on one issue does not automatically disqualify disclosure on an unrelated issue. For example, a taxpayer may be under audit for unreported Canadian employment income and still make a valid voluntary disclosure for an unrelated unfiled T1135 – Foreign Income Verification Statement.
In practice, the VDP agent assigned to the case will contact the auditor to evaluate the link, or the absence of a link, between the audit and the VDP application.
Where a disclosure remains voluntary, the next question is whether it is unprompted or prompted, as this distinction determines the level of relief available.
Prompted vs. Unprompted: The Dividing Line
Unprompted: Where the taxpayer comes forward entirely on their own initiative, with no prior CRA contact of any kind about the specific issue being disclosed (other than general informational or educational correspondence), the disclosure will be unprompted.
The CRA issues general awareness or educational letters to support compliance. These communications do not, in themselves, render a disclosure prompted. For example, the CRA may send a general notice to cryptocurrency holders reminding them of their reporting obligations. Where a taxpayer receives such communication, identifies their own compliance deficiency, and files a voluntary disclosure, the disclosure will generally be treated as unprompted with access to the highest level of relief: 100% penalty relief, 75% interest relief, and protection from prosecution.
Prompted: A disclosure is prompted where the CRA has communicated with a specific taxpayer by name (verbally or in writing) about a potential error, omission, or compliance gap, typically with an expectation or deadline for correction.
In these circumstances, relief remains available but is reduced. A prompted disclosure may qualify for up to 100% penalty relief, 25% interest relief, and protection from prosecution.
Implications
The revised policy expands access to the VDP by broadening what constitutes voluntariness and introducing enhanced relief. At the same time, it requires advisors to carefully distinguish between general CRA contact, which does not preclude a disclosure, and targeted compliance activity in respect of a specific issue and taxpayer, which may do so.
The CRA suggests that taxpayers who are contacted about a specific matter should speak with their representative quickly, because the VDP window on that issue may still be open for a short time, or it may have already closed. Early assessment and prompt action remain critical to preserving access to the VDP and securing the most favourable level of relief.
