The Scenario

Earlier this year, I met with a client who had immigrated to Canada some ten or so years ago. As is often the case for many immigrants, the process of bringing over one’s life savings and other assets to a new country can be a long and arduous process that takes a number of years. That was the case for this client, but the problem, as she frantically told me, was that she never filed her T1135s.

The T1135 Foreign Income Verification Statement is reporting requirement that must be filed by all Canadian taxpayers who at any time in the year owned foreign investment property or properties with a total value greater than $100,000 CDN. Failure to file T1135s can result in a maximum penalty of $2,500 in a given year. My client, who was unfamiliar with the Canadian taxation system and had relied on her accountant to handle her tax affairs, was unaware of her T1135 reporting obligations for a long time.

Fortunately for her, the Canada Revenue Agency runs the Voluntary Disclosure Program (VDP), which allows noncompliant taxpayers to correct mistakes or omissions on previously filed returns. In return, successful applicants to the VDP can avoid penalties, interest, and criminal prosecution.


Two Programs

Starting from March 1, 2018, the new VDP divided the application process into two tracks, the General and the Limited program.  Of the two, the General Program is generally the preferred track as it provides relief from all penalties and partial relief on interest on the ten years preceding the three most recent years of that returns needed to be filed. As a general rule, the General Program is for taxpayers who are correcting unintentional errors or omissions on their prior returns.

On the other hand, the limited program only provides relief from potential gross negligence penalties and does not provide any relief for interest.  Generally speaking, the limited program is for scenarios where there was an element of intentional conduct on the part of the taxpayer with regard to their noncompliance with their reporting requirements.  In both cases, a disclosing taxpayer will not be referred for criminal prosecution related to the information being disclosed.


Valid Application

In order for an application to the VDP to be accepted as a valid voluntary disclosure, the following five conditions have to be met:

  1. It must be voluntary.
  2. It must be complete.
  3. It must involve, at least potentially, a penalty.
  4. It must include information that is at least one year past due.
  5. It must include payment of the estimated tax owing.


Appealing the CRA’s VDP Decision

As the VDP is a discretionary program by the CRA, the Income Tax Act does not provide any avenues for appeal to taxpayers unhappy with a CRA decision with respect to a VDP application. If the CRA rejects a taxpayer’s VDP application, the only potential recourse would be either to request that the CRA reconsider the original decision or to file an application to the Federal Court for judicial review.



There are numerous situations where a taxpayer should consider applying to the voluntary disclosure program. Consulting a tax lawyer can help a taxpayer effectively navigate the ins and outs of the program and increase their chances of success with the VDP.


DISCLAIMER: Please note this article is not legal advice. Always consult a lawyer for legal advice regarding your particular situation. The article is not necessarily a complete and accurate picture of the law – it is an article of a general nature.

Published on November 29, 2021