THE VOLUNTARY DISCLOSURES PROGRAM: Recently the CRA has released a draft information circular in which they propose changes to the popular program effective for taxation years after December 31, 2017. Some of the changes to the program are as follows:
- No-name disclosures: Clarification that a voluntary disclosure with no-name are pre-disclosure discussion that are non-binding and general in nature. The discussion is for the benefit of the taxpayer to better understand the VDP and do not constitute acceptance into the VDP.
- Submission system: Introduction of a two-track submission system:
- General Program: the taxpayer will be eligible for penalty relief and partial interest relief, which is similar to the existing program.
- Limited Program: the taxpayer will only be eligible for limited relief for disclosures that disclose “major non-compliance” include the following:
- Significant efforts deployed to avoid detection through the use of offshore vehicles or other means;
- Large dollar amounts;
- Multiple years of non-compliance;
- A sophisticated taxpayer;
- The disclosure is made after an official CRA statement regarding its intended focus of compliance or following CRA correspondence or campaigns;
- Any other circumstance in which a high degree of taxpayer culpability contributed to the failure to comply.;
Under the limited program, the taxpayer is only provided the relief from criminal prosecution and gross negligent penalties but not for interest or late-filing penalties.
- Limited relief: No relief for corporations with gross revenue over $250 million and transfer pricing adjustments
- Limited objection rights: if the taxpayer application is accepted under the Limited Program, the taxpayer will be required to waive their right to object in relation to the specific matter disclosed in the VDP application. However, this waiver will not prevent a taxpayer from filing a Notice of Objection in circumstances where the assessment includes a calculation error, relates to a characterization issue, or relates to an issue other than the matter disclosed in the VDP application.
- Payment: In order for the disclosure to be accepted the estimated tax must be paid at the time of VDP application
Overall, the changes to the VDP are aimed at limiting the relief to “major non-compliance.” Given the abundance of disclosure that will be likely have significantly reduced relief, if a voluntary disclosure is to be made, consideration should be given to doing it before the end of 2017.