The Canada Revenue Agency (CRA) has introduced significant updates to the Voluntary Disclosures Program (VDP), effective 1 October 2025, that could impact how employers and employees proactively correct past errors or omissions. These updates are particularly relevant to expatriate assignments, shadow payrolls, and foreign asset/income reporting.
The new rules expand eligibility, increase potential relief, and simplify the process, creating an opportunity for employers to review historical filings across their mobile workforce.
According to the CRA, the VDP will be less restrictive under the new rules. For example, taxpayers and registrants who are prompted by communications from the CRA about a potential non-compliance issue would now be eligible for the program.
The VDP now offers two relief tiers: general and partial relief. General relief normally applies to unprompted applications, which will receive 75% relief of the applicable interest and 100% relief of the applicable penalties. Partial relief applies to prompted applications, which will receive 25% relief of the applicable interest and up to 100% relief of the applicable penalties.
The table below summarises the relevant provisions.
The revised framework is more generous, transparent, and aligned with the realities of mobile talent than the prior rules.
Employers should consider engaging cross-border tax advisors with VDP expertise to assess risks and prepare timely disclosures.
For more information, please consult your regular BDO contact or the author of this article.
Debra Moses
BDO in Canada
The new rules expand eligibility, increase potential relief, and simplify the process, creating an opportunity for employers to review historical filings across their mobile workforce.
What’s Changing?
According to the CRA, the VDP will be less restrictive under the new rules. For example, taxpayers and registrants who are prompted by communications from the CRA about a potential non-compliance issue would now be eligible for the program.The VDP now offers two relief tiers: general and partial relief. General relief normally applies to unprompted applications, which will receive 75% relief of the applicable interest and 100% relief of the applicable penalties. Partial relief applies to prompted applications, which will receive 25% relief of the applicable interest and up to 100% relief of the applicable penalties.
The table below summarises the relevant provisions.
| Area | Before | New (Oct 1, 2025) | Why It Matters |
| Eligibility | Prior CRA contact often disqualified a disclosure. | Only audits/investigations disqualify; routine CRA contact no longer does. | More employees and employers can now qualify for relief. |
| Relief Levels | Limited interest/penalty relief in many cases. | Up to 75% interest and 100% penalty relief for unprompted disclosures. | Correcting issues becomes less costly. |
| Foreign Reporting | No clear documentation timelines. | Must include up to 10 years of foreign income/assets. | Crucial for globally mobile employees with offshore holdings. |
| GST/HST Rules | Complex, inconsistent relief (e.g., on shadow payroll GST). | Four-year lookback and full relief for “wash transactions.” | Simplifies GST/HST compliance corrections. |
| Application Process | RC199 form and guidance unclear. | New RC199, simplified instructions, more transparent reviews. | Easier for HR/tax teams to manage disclosures. |
Action Items for Global Mobility Programs
- Audit cross-border employee filings: Focus on outbound Canadians, inbound expats, and non-residents with Canadian tax obligations.
- Review shadow payroll and GST/HST treatment: Confirm whether amounts are properly declared and recovered.
- Flag noncompliance early: The most generous relief is available only before CRA initiates contact.
- Prepare supporting documentation: Documents for up to 10 years of foreign-source income, assets, or trusts may be required.
- Communicate with affected employees: VDP relief can address issues such as:
- Unreported foreign income
- T1135/asset disclosure omissions
- Missed filings during assignments
- Errors tied to global compensation
BDO Insights
The October 2025 VDP changes create a time-limited opportunity for employers and employees in global mobility programs to proactively correct historical compliance gaps before CRA contact removes eligibility.The revised framework is more generous, transparent, and aligned with the realities of mobile talent than the prior rules.
Employers should consider engaging cross-border tax advisors with VDP expertise to assess risks and prepare timely disclosures.
For more information, please consult your regular BDO contact or the author of this article.
Debra Moses
BDO in Canada