2025 CRA Updated - VDP, CRS and Crypto

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Updated Voluntary Disclosures Program (VDP) – Effective September 30, 2025

On September 10, 2025, the CRA released a revised version of Information Circular IC00-1R7, Voluntary Disclosures Program (VDP). The updates, effective for applications submitted on or after September 30, 2025, aim to simplify the process and expand access to the program.

Key changes include:

• Broader eligibility for more taxpayers.

• A streamlined RC199 application form.

• Enhanced relief, including greater interest relief for certain disclosures.

If a VDP application is accepted, taxpayers may receive relief from penalties, partial interest, and no referral for criminal prosecution. The extent of relief depends on the specific circumstances of each case.

Taxpayers who have not met their tax obligations and have resulting liabilities or penalties are encouraged to come forward voluntarily. While the outstanding taxes must still be paid, accepted VDP applications can significantly reduce the penalties and interest that would otherwise apply if non-compliance is discovered during a CRA audit.

Under the revised Voluntary Disclosures Program (VDP), eligibility criteria have been broadened and submissions will now be assessed under two categories:

• Unprompted Applications: Submitted before any CRA contact regarding a specific non-compliance issue. This includes cases where the taxpayer has only received a general education letter or filing reminder from the CRA.

• Prompted Applications: Submitted after the CRA has initiated verbal or written contact about a specific non-compliance issue—such as identifying an error or omission, or setting a deadline to correct one—or where the CRA has received relevant third-party information indicating possible non-compliance.

Taxpayers currently under audit, enforcement action, or criminal investigation remain ineligible for the VDP.

The updated program introduces a two-tier system for penalty and interest relief:

• General Relief: Available for unprompted applications, providing full (100%) penalty relief and 75% interest relief.

• Partial Relief: Available for prompted applications, offering up to 100% penalty relief and 25% interest relief.

If a VDP application is accepted, the taxpayer will be granted relief from gross negligence penalties and will not be referred for criminal prosecution.

To submit a valid application, taxpayers must:

• Complete and submit Form RC199 – Voluntary Disclosures Program (VDP) Application.

• Include all supporting documentation (e.g. returns, forms, etc.) necessary to correct the non-compliance, covering:

  • The most recent six years for income or assets sourced in Canada.

  • The most recent ten years for foreign-sourced income or assets.

The CRA has also clarified that, in limited circumstances, it may consider a second VDP application from the same taxpayer if:

• The situation was beyond the taxpayer’s control, or

• The new disclosure relates to a different issue than the one addressed in a previous application.

  
  

If you need further understanding on how the changes to the VDP might affect you, please contact us.

CRS 2.0 – Proposed Updates to Common Reporting Standards

On August 15, 2025, the Department of Finance released draft legislative proposals for public consultation to update the Common Reporting Standard (CRS), commonly referred to as CRS 2.0.

Effective for the 2026 calendar year, CRS 2.0 will align the CRS with proposed crypto-asset reporting rules and expand reporting obligations for financial institutions (FIs). Key changes include enhanced due diligence requirements, such as obtaining or verifying self-certification from reportable persons.

The proposed updates will:

• Broaden the scope of assets, accounts, and account holders subject to CRS reporting.

• Expand the definition of a reporting Canadian financial institution to potentially include crypto-asset service providers and other previously non-reporting entities.

Crypto-Asset Reporting Framework

On August 15, 2025, the Department of Finance released for consultation draft legislative proposal to implement the Crypto-Asset Reporting Framework (CARF). The proposals mark a significant step in aligning Canadian tax transparency rules with the latest international standards by OECD. The new rules will apply to crypto-asset service providers (CASPs) and are proposed to take effect starting with the 2026 calendar year.

A crypto asset is defined as a digital representation of value that replies on cryptographically secured distributed ledger technology (such as blockchain) or similar technology to validate and secure transactions. This includes cryptocurrencies (e.g. Bitcoin, Solana, Ethereum), stablecoins, certain derivatives issued in crypto form, and some non-fungible tokens (NFTs) that can be used for payment or investment purposes.

CARF provides for the automatic exchange of information on crypto assets, CASPs and crypto asset holders, and was developed by the OECD to address the rapid development and growth of the crypto assets market. CARF frequently references the Common Reporting Standards (CRS) and is ultimately premised on the same core compliance pillars: due diligence and annual information reporting.

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©2025 IMPACT CPA LLP, an Ontario limited liability partnership. All rights reserved.

The content of this pamphlet is prepared by IMPACT CPA LLP for information only and are not intended to provide professional advice as individual situations will differ. We would be please to discuss your specific situation and tailor a tax plan to meet your requirements