Voluntary Disclosure / Tax Amnesty
If you have never filed all your income tax returns or have filed them incorrectly, this page is for you. And you don’t need a costly tax lawyer to assist you with this.
What is Voluntary Disclosure?
Revenue Canada’s Voluntary Disclosure program, commonly referred to as tax amnesty or tax pardon, is a fairness program that allows for taxpayers to voluntarily declare income and file returns that have never been filed or have been filed incorrectly.
This program waives civil penalties and avoids criminal prosecutions for those who are volunteering to act in accordance with their legal responsibilities, as under the Income Tax Act and Excise Tax Acts by reporting their affairs before the Canada Revenue Agency (CRA) begins any action or investigation.
Persons that use this program will pay the taxes owing and interest but penalties will be waived. As well, policies exist that acknowledge uncontrollable circumstances and can provide relief from interest in certain situations.
Non-residents are also accommodated and if they meet requirements, and can extend their submission of section 216 returns.
This program also allows for anonymous disclosure under the No-Name Policy, which protects the identities of the complying taxpayers.
If a taxpayer decides to keep his or her identify anonymous and confidential, he or she will be able to proceed with disclosure, free of prosecution for 90 days.
The 90 day period begins from the “effective date of disclosure,” which is determined by the date of a written voluntary disclosure submission or the receipt of a VDP-1 Taxpayer Agreement Form as received by the CCRA tax services office.
This period allows for the taxpayer to prepare and submit a complete disclosure without any CRA interference or prosecution. This anonymity is even applicable if the unreported income has been earned off-shore or through criminal activity.
Who Does this program apply to?
Tax amnesty can be applied in several scenarios including:
– Failure to report income
– Income with inaccurate or missing information
– Income earned off-shore or from criminal activity
– Not filed tax returns
– Improper expense claims
– Not remitted source deductions
– Neglecting to retain of a portion of a purchase price on the acquiring of assets from non-residents under section 116 of the Act.
Requirements for Voluntary Disclosure
Four conditions must exist for an individual to use Voluntary Disclosure:
1.The disclosure must be voluntary. If you are already being investigated, it is too late. You must initiate the disclosure and contact the Canada Revenue Agency before they contact you!
2.The disclosure must be complete and accurate. Previously pardoned penalties will be applied if a person reveals only partial information or provides information with material errors.
3.The disclosure needs to involve a penalty. If no penalty exists, declare and file as usual.
4.Disclosure must be information that is over one year old or, if less than one year, not simply employed as an attempt to use this program to file late and avoid penalty.
Legislative References for Voluntary Disclosure
The CRA has the legislative authority to waive or cancel penalties, in whole or in part, on a voluntary disclosure. The pertinent legislative provisions can be found in:
– subsection 220(3.1) of the Income Tax Act
– section 88 of the Excise Tax Act
– section 281.1 of the Excise Tax Act
– subsection 3.3(1) of the Customs Act
– subsection 126(1) of the Customs Tariff