At present the VDP only applies to the latest 10 years or undeclared income or unfilled returns. There are no penalties and often a reduction of income for that 10 year period. However there was no amnesty available for prior years. The voluntary disclosure officer might in some cases not require that all previous year’s income be included, but this was not a matter of CRA policy and was not consistently applied. It appears that this is about to change.
CRA will apparently change the Canadian tax amnesty rules to bring them closer in line with the IRS tax amnesty program. The voluntary disclosure department will only go back a maximum of 10 years when determining what income is to be reported and taxed in a tax amnesty application.
This possible shift in policy appears to be prompted by the US UBS prosecution that has resulted in concern by Canadian taxpayers with undisclosed offshore bank accounts. Many of those Canadians with offshore assets and income were concerned about filing a VD application due to the uncertainly of what would happen with older years. The worries of those individuals with unreported offshore income will now be alleviated.
Since the new VD policy has not yet been announced by CRA, Canadian taxpayers considering submitting a tax amnesty application should contact us to discuss the appropriate strategy. There is no time frame from the Canadian tax authorities for the new VD rules, so a delay in submitting the application exposes the taxpayer to interim action by CRA that would potentially disallow a future application.
