Unreported Foreign Income from Past Years? The Voluntary Disclosures Program

VDP conditions and process, and how it differs from being caught

Scott Tang, CPAUpdated 2026-11-052026 rules5 min read

You didn't report rent or interest from China for the past few years, and you didn't file the T1135 either — now you want to put it right. What do you do? The CRA's Voluntary Disclosures Program (VDP) lets taxpayers correct their affairs on their own initiative. If you meet the conditions and your application is accepted, you still pay the tax, but the applicable penalties can be waived and the interest reduced, and you won't be referred for criminal prosecution for the matters you disclosed. From October 1, 2025, the program was changed to be more lenient.

2025-10-01

The new VDP took effect; apply using the new Form RC199

100%

For accepted unprompted applications, applicable penalties are generally waived in full

75%

For accepted unprompted applications, applicable interest is generally reduced by 75%

Prompted

If the CRA has already contacted you about a specific issue, or has obtained information from a third party about your possible non-compliance, you can still apply, but the relief is much smaller

Coming forward yourself vs being caught

Item	Unprompted disclosureRecommended	Prompted disclosure	Audit or investigation already started, or caught
Penalties	Generally waived in full	Case by case, up to a full waiver	Penalties for unreported income, T1135 penalties and others apply as usual
Interest	Generally reduced by 75%	Generally reduced by 25%	Charged in full
Criminal prosecution	Once accepted, no referral for prosecution for the matters disclosed	Same as the left, once accepted	Possible in serious cases
Tax	Still payable	Still payable	Still payable

An education letter that only gives general guidance doesn't count as a prompt; a letter that points to a specific issue of yours and sets a deadline to correct it (including a letter about unreported income) is generally treated as a prompt. If the CRA has already received specific third-party information about your possible non-compliance, your disclosure is generally treated as prompted even if the CRA hasn't contacted you yet. If an audit or investigation of the related matters has already started (including one involving a person related to you, or one by another enforcement or regulatory authority), the disclosure is generally not considered voluntary, and you can't apply.

How an application generally works

1
Assess first
List the years, income and foreign assets that weren't reported
2
Calculate the tax
The unreported income for each year and the tax owing
3
Complete RC199
Set out the facts clearly and attach the returns being filed or corrected
4
CRA review
You may be asked for more information
5
Case closed
The CRA issues notices of reassessment, with relief according to the outcome

When you can use it

It must be "voluntary"
If an audit or investigation of the related matters has already started, you generally don't qualify; if the CRA has already contacted you about a specific issue or has received third-party information, you go through the "prompted" track, with less relief.
It must be "complete"
Disclose all related matters together. Information is generally needed for the most recent 6 years, or generally the most recent 10 years where foreign assets or income are involved, and the CRA may ask for more years.
A penalty must be at stake
It applies only where the omission would result in penalties or interest; for an ordinary minor correction, just change your tax return directly.
At least one year overdue
If a deadline has only recently passed and you want to make a correction, you generally just file or correct the return directly.

Points to watch

The sooner the better
CRS information is exchanged every year; if you wait until the CRA writes to you before you come forward, the percentage of relief drops noticeably.
Gather complete records
Foreign bank statements, leases, tax payment certificates, brokerage statements: the older the year, the harder they are to obtain, so first gather everything you can.
Have the tax ready
The relief covers penalties and part of the interest; the tax itself must be paid. When you apply, you need to pay the estimated tax in full, or request a payment arrangement (approval is not guaranteed).
Assess before you submit
What you disclose becomes part of the CRA's records, so get the facts and amounts in order before you submit.

How Sheng Qian CPA can help

A confidential assessment first
We look at which years, income and filings you missed, and calculate the tax, interest and possible penalties.
Comparing the options
We look at whether a direct correction or the VDP suits you better.
Preparing and submitting
We prepare the returns being filed, the T1135s and the RC199 together, and follow up on the CRA's review; for fees, see "What Sheng Qian CPA Can Do for Cross-Border Families: From Tax Returns to Foreign Asset Reporting" in this series.

Sources

CRA: Voluntary Disclosures Program · IC00-1R7 Voluntary Disclosures Program
CRA: Form RC199
Background reading (unofficial): PwC CRA revises its Voluntary Disclosures Program effective October 1, 2025

Disclaimer

This article is general information only and is not tax advice. Everyone's situation is different; please consult a CPA about your specific arrangements. Service fees are as set out in our written quote.