corporation, a partnership, a trust, a Goods and Services Tax/Harmonized Sales Tax (GST/HST)

registrant/claimant or a registered exporter of softwood lumber products.

Income Tax Act (ITA), the Excise Tax Act (ETA), the Excise Act, 2001 (EA, 2001), the Air Travellers

Security Charge Act (ATSCA), or the Softwood Lumber Products Export Charge Act, 2006 (SLPECA),

and any other acts administered by the Canada Revenue Agency (CRA).

information, or to disclose information not previously reported. For example, taxpayers may not have met their tax obligations if they claimed ineligible expenses, failed to remit source deductions or the GST/HST, or did not file an information return.

exhaustive, and is not meant to restrict the spirit or intent of the legislation.

come forward and correct previous omissions in their dealings with the CRA. Taxpayers who make a valid disclosure will have to pay the taxes or charges plus interest, without penalty or prosecution that the taxpayer would otherwise be subject to under the acts noted above.

 9. The VDP is not intended to serve as a vehicle for taxpayers to intentionally avoid their legal

obligations under the acts administered by the CRA.

Penalty Relief

considered a valid disclosure and the taxpayer will not be charged penalties or prosecuted with

respect to the disclosure.

12. In addition to penalty relief, if a disclosure is accepted as valid by the CRA, the Minister may

grant partial relief in the application of interest against a taxpayer in respect of assessments for years

or reporting periods preceding the three most recent years of returns required to be filed.

13. For income tax submissions made on or after January 1, 2005, the Minister's ability to grant

years after the end of the fiscal month of a person, waive or reduce interest, or waive or cancel

taxpayer with an explanation of the reasons and factors for the decision.

taxpayer:

. failed to fulfill their obligations under the applicable act,

. failed to report any taxable income they received,

. claimed ineligible expenses on a tax return,

. failed to remit source deductions of their employees,

. failed to report an amount of GSTjHST, (which may include undisclosed liabilities or improperly

claimed refunds or rebates, unpaid tax or net tax from a previous reporting period),

. failed to file information returns, and

. failed to report foreign sourced income that is taxable in Canada.

policy:

using normal processing procedures.

. "elections"; there are provisions within the various acts administered by the CRA which entitle

taxpayers to choose or "elect" specific treatment of certain tax transactions, e.g. section 216

returns under the ITA.

. "advance pricing arrangement"; this is an agreement between the Minister of National Revenue

and a taxpayer that covers certain tax transactions between the taxpayer and a non-resident

entity. The agreement confirms an appropriate transfer pricing methodology, in advance, and

its application to specific transactions for a specified time frame using certain terms and

conditions.

. "rollover provisions"; as election provisions, these allow a taxpayer to defer income amounts

that would otherwise arise on the transfer of property to a taxable Canadian corporation. See

bankruptcy .

. post-assessment requests for penalty and interest relief: these requests will be considered as

retroactive tax planning.

 20. If the VDP is not applicable to a taxpayer's particular tax situation, relief may be requested in

accordance with the taxpayer relief provisions.

(Named or No-Name). Each method includes the same consideration and review of all relevant

information, however it is the timing of the identification of the taxpayer that differs in these two

methods.

22. A submission must be made in writing, and may be mailed or faxed to the TSO that has

jurisdiction over the area where the taxpayer resides. For businesses, this would be based on their

operating address.

information or documentation for the disclosure. In these circumstances the CRA may allow the

taxpayer a period of time to submit such information in order to complete the disclosure submission.

Normally this period of time is no more than 90 days from the effective date of disclosure (EDD)

initial disclosure submission.

25. Taxpayers who are unsure they want to proceed with a disclosure are given an opportunity to

participate in preliminary discussions about their situation on a "no-name" basis. These discussions

with a VDPofficer are informal, non-binding, and general in nature and are done before the identity of

the taxpayer is revealed. They are for the benefit of the taxpayer and are intended to provide insight

into the VDPprocess, a better understanding of the risks involved in remaining non-compliant, and

the relief available under the VDP.

26. Based on the preliminary information provided by the taxpayer as described in paragraph ~ 44,

the VDP officer may confirm that there is nothing set out in the information provided that may

immediately disqualify the taxpayer from further consideration under the VDP. If all the required

information for a complete disclosure, except for the identity of the taxpayer, has been submitted, the

CRA can also review, upon request, this preliminary information and advise, without prejudice, on the

possible tax implications of the disclosure. This advice is based on the facts as submitted on a noname

basis. If there is any discrepancy between the information that is provided and the information

that is verified once the taxpayer is identified, this preliminary advice may be invalidated.

27. The CRA can undertake to provide a final and determinative decision on a no-name disclosure

only after the identity of the taxpayer is known and all facts of the disclosure, in respect to the four

validity conditions have been verified. In these circumstances, the identity

of the taxpayer must be provided within 90 days of the EDD(paragraphs ~ 50 to 54). There will be no

extensions to the timeframe for providing the identity of the taxpayer.

taxpayer to then make use of the VDP, they must identify themselves.

29. The taxpayer may decide not to proceed with the no-name disclosure. They would then,

however, remain at risk of the CRAfinding the omission and assessing the applicable tax or charge,

penalty and interest, in addition to possible criminal investigation and prosecution.

the information being disclosed to the CRA, or

. enforcement action relating to the disclosure was initiated by the CRA or any other authority or

administration on the taxpayer, or on a person associated with, or related to the taxpayer (this

includes, but is not restricted to, corporations, shareholders, spouses and partners), or on a

third party, where the purpose and impact of the enforcement action against the third party is

sufficiently related to the present disclosure, and

. the enforcement action is likely to have uncovered the information being disclosed.

. requests, demands or requirements issued by the CRA, relating to unfiled returns, unremitted

taxes/ instalments, deductions required at source or non-registrants; (although the

aforementioned actions may only pertain to one specific year or reporting period, the procedure

will be considered to be an enforcement action, for purposes of the VDP, for all taxation years

or reporting periods).

. For example: a taxpayer has not complied with their filing requirement for the 2002 through

2005 taxation years. Upon determining that the taxpayer was required to file tax returns, the

CRA issued a "request-to-file" (Form TXll). The CRA request, requiring the taxpayer to file the

2003 tax return, is mailed to the taxpayer on July 20, 2006. On August 15, 2006, the taxpayer

makes a disclosure and submits all of the tax returns (2002-2005), correctly prepared with all

supporting documentation, etc. The CRA request-to-file is an enforcement action relating to all

unfiled returns for that taxpayer. Although the request-to-file was for the 2003 taxation year,

the disclosure would be denied because the taxpayer did not voluntarily come forward to file

the other returns before the CRA undertook enforcement action;

. requests, demands or requirements which have been issued with reference to other tax

accounts of the taxpayer, partners of the taxpayer or corporations associated with or related to

the taxpayer;

. direct contact by a CRA employee for any reason relating to non-compliance (e.g. unfiled

returns, audit, collection issues); and/or

. an audit, investigation or other enforcement action by another authority or administration, such

as, but not limited to, a police force, securities commission or provincial authority.

33. Not all CRA initiated enforcement action may be cause for a disclosure to be denied by the CRA.

Examples of this include:

. a recent audit of a taxpayer was related to a source deductions (payroll) issue. The same

taxpayer is submitting a disclosure for an amount of GST/HST, which was collected but not

remitted to the CRA as required. There may be no correlation between these two taxation

issues and as such, the enforcement action on the payroll account may not be cause to deny

the GST/HST disclosure, or

. a large corporation may be under CRA audit but the information being disclosed is not part of

the audit protocol.

reporting periods where there was previously inaccurate, incomplete or unreported information

relating to any and all tax accounts with which the taxpayer is associated. While the disclosure is

being evaluated by the CRA, the VDP officer may request additional specific documentation in order to

verify certain details such as revenue amounts being disclosed, tax credits being applied for, or

expenses being claimed. The taxpayer must comply with such requests within the stipulated

case to be verified. Additional information on requirements for maintaining books and records can be

the information being disclosed to the CRA, or

. enforcement action relating to the disclosure was initiated by the CRAor any other authority or

administration on the taxpayer, or on a person associated with, or related to the taxpayer (this

includes, but is not restricted to, corporations, shareholders, spouses and partners), or on a

third party, where the purpose and impact of the enforcement action against the third party is

sufficiently related to the present disclosure, and

. the enforcement action is likely to have uncovered the information being disclosed.

~ 35. For purposes of the VDP, an "enforcement action" may include, but is not limited to:

. requests, demands or requirements issued by the CRA,relating to unfiled returns, unremitted

taxesj instalments, deductions required at source or non-registrants; (although the

aforementioned actions may only pertain to one specific year or reporting period, the procedure

will be considered to be an enforcement action, for purposes of the VDP, for all taxation years

or reporting periods).

. For example: a taxpayer has not complied with their filing requirement for the 2002 through

2005 taxation years. Upon determining that the taxpayer was required to file tax returns, the

CRAissued a "request-to-file" (Form TXll). The CRArequest, requiring the taxpayer to file the

2003 tax return, is mailed to the taxpayer on July 20, 2006. On August 15, 2006, the taxpayer

makes a disclosure and submits all of the tax returns (2002-2005), correctly prepared with all

supporting documentation, etc. The CRArequest-to-file is an enforcement action relating to all

unfiled returns for that taxpayer. Although the request-to-file was for the 2003 taxation year,

the disclosure would be denied because the taxpayer did not voluntarily come forward to file

the other returns before the CRAundertook enforcement action;

. requests, demands or requirements which have been issued with reference to other tax

accounts of the taxpayer, partners of the taxpayer or corporations associated with or related to

the taxpayer;

. direct contact by a CRAemployee for any reason relating to non-compliance (e.g. unfiled

returns, audit, collection issues); andjor

. an audit, investigation or other enforcement action by another authority or administration, such

as, but not limited to, a police force, securities commission or provincial authority.

36, Due to the nature of a particular disclosure, referrals to other programs within the CRA may be

considered necessary in order to fully analyze the disclosure,

disqualified simply because it contains minor errors or omissions, Each submission will be reviewed onit's own merits,

may be a late filing penalty, a failure to remit penalty, an instalment penalty, or a discretionary

penalty, such as an omission penalty or a gross negligence penalty. In the event a penalty does not

apply, the taxpayer cannot seek relief through the VDP. However, the disclosed information should

still be submitted and it will be handled through the CRA's normal processing procedures.

39. The disclosure must include information that is:

(i) at least one year past due, or

(ii) less than one year past due where the disclosure is to correct a previously filed return or where

the disclosure contains information that also meets the condition of subparagraph (i) above.

 40. For example, a taxpayer had not filed tax returns for the years 2000 to 2004. On November 10,

2005, the taxpayer submitted all of the tax returns requesting they be considered under the VDP.

Although the 2004 tax return is less than one year past due (filing deadline of April 30, 2005) the CRA will consider the 2004 return as part of this disclosure, provided that all other conditions have been met.

41. In contrast, the 2004 tax return would not be considered for VDP treatment if it were the only

return being filed. In that case, the 2004 return would be handled through the CRA's normal

processing procedures.

42. The intent of sub-paragraph 39(ii) noted above, is to allow the timely correction of previously

website at: www.crg:gIc.gc.cg. Failure to use Form RC199or to provide similar information as per

Form RC199,may delay the review of the disclosure.

 44. In order to support a disclosure submission, the following information pertaining to the

taxpayer's situation must be submitted:

. the name, address, telephone number, social insurance number, partnership number, trust

account number, business number, license number, GST/HST registration number or any other

identification tax number assigned by the CRAto the taxpayer,

if a no-name disclosure, this information would not be required;

. the taxpayer's postal code,

if a no-name disclosure, only include the first three characters of the taxpayer's postal

code (used to determine the TSO that will be responsible for the file);

. the address of the taxpayer's authorized representative, including telephone and fax numbers

(if applicable);

. gender and age (if an individual and involves a no-name disclosure);

. the taxation year(s), reporting period(s) or fiscal period(s) involved in the disclosure;

. amount of the disclosure (where applicable);

. type of omission (business income, unremitted GST/HST, investment income, pension income,

capital gain, etc.);

. reason for the omission;

. primary business activity, and

. an explanation of how the taxpayer considers that each of the four validity conditions

(paragraphs ~ 31 to ~ 42) have been met.

45. Each disclosure submission must include enough detail to allow for verification of the facts.

Taxpayers and/or their authorized representatives are expected to make all documents, records, and

books of account, as well as any other required information, available upon request.

46. Taxpayers are expected to remain compliant after using the VDP. Under normal circumstances,

a taxpayer is entitled to utilize the benefits of the VDPonly one time. A second disclosure for the

same taxpayer may be considered by the CRAif the circumstances surrounding the second disclosure

are beyond the taxpayer's control. At the time of making a second disclosure, a taxpayer must

provide their name and specify that they had previously made a disclosure. If it is discovered during

the course of the disclosure review that the taxpayer had previously made a disclosure and the

taxpayer has not disclosed this fact, the CRAmay deem the disclosure to be invalid for VDPpurposes.

If the second disclosure is for the same issue that was previously denied as incomplete due to

information not being received by the stipulated date, then the second disclosure will be denied.

47. The taxpayer's authorized representative can make the disclosure. The taxpayer must grant

proper authorization to the representative by submitting a signed copy of the appropriate

authorization form.

. For matters pertaining to Canada Pension Plan or Employment Insurance disclosures, submit

form CPT13.9,CPP1

 48. The CRA cannot discuss any confidential information with a representative prior to receiving the

appropriate authorization.

 49. When a taxpayer's authorized representative makes a disclosure, the written authorization

. the name, address, telephone number, social insurance number, partnership number, trust

account number, business number, license number, GSI/HSI registration number or any other

identification tax number assigned by the CRA to the taxpayer,

0 if a no-name disclosure, this information would not be required;

. the taxpayer's postal code,

0 if a no-name disclosure, only include the first three characters of the taxpayer's postal

code (used to determine the ISO that will be responsible for the file);

. the address of the taxpayer's authorized representative, including telephone and fax numbers

(if applicable);

. gender and age (if an individual and involves a no-name disclosure);

. the taxation year(s), reporting period(s) or fiscal period(s) involved in the disclosure;

. amount of the disclosure (where applicable);

. type of return(s) involved: personal I1, GSI/HSI, corporate I2, trust I3, etc.;

. type of information return(s) and/or slip(s) involved (e.g. I3, I4, I1134, I1135) (if applicable);

. type of omission (business income, unremitted GSI/HSI, investment income, pension income,

capital gain, etc.);

. reason for the omission;

. primary business activity, and

. an explanation of how the taxpayer considers that each of the four validity conditions

(paragraphs ~ 31 to ~ 42) have been met.

. the date a letter, signed by the taxpayer or the taxpayer's authorized representative and

CRA.

granted protection against penalties and possible prosecution, regarding the amounts included in the

disclosure.

additional relevant information and/or documentation that may be required to complete the

disclosure.

53. If this time frame is not sufficient due to the complexity of the disclosure or other extraordinary

circumstances, the Assistant Director, Enforcement Division of the TSO, may authorize an extension

of this period, upon receipt of a written request from the taxpayer. The additional information must

be provided within the stipulated time frame. However, an extension will not be granted to the 90-

frame:

. in the case of a named disclosure, the CRA may commence enforcement action wherein

penalties and interest are applicable and prosecution may be initiated, or

. in the case of a no-name disclosure, the file will be closed. The taxpayer could then be subject

to full penalties, interest and possible prosecution.

55. The detailed disclosure submission should be forwarded to the Assistant Director, Enforcement

Division of the TSO that has jurisdiction over the area where the taxpayer resides. For businesses,

this would be based on their operating address. To locate your TSO, please click on the following link,

TSO, or consult the CRA website at: www.cra-arc.gc.ca. Under limited circumstances, a taxpayer may

request to transfer a disclosure to another TSO. This type of request must be adequately justified in

writing, and the decision on where the disclosure is reviewed will be at the discretion of the CRA.

that any of the four validity conditions have not been met; the taxpayer would then be advised in

writing that:

. the disclosure is being denied,

. the disclosed information may result in an assessmentor reassessment,

. penalties and interest may be levied, and

. in certain circumstances, an investigation and prosecution may be initiated.

be presented at the same time the identification of the taxpayer is provided.

~ 56. If it is determined, after the VDP officer has completed evaluating the disclosure submission,

that any of the four validity conditions have not been met; the taxpayer would then be advised in

writing that:

. the disclosure is being denied,

. the disclosed information may be referred to another CRA program area,

. the disclosed information may result in an assessment or reassessment,

. penalties and interest may be levied, and

. in certain circumstances, an investigation and prosecution may be initiated.

57. There is no right of objection under the Acts mentioned in paragraph 3 of this information

circular, for a taxpayer to dispute a discretionary decision that denied relief, or allowed only partial

relief. However, if the taxpayer believes that the Minister has not exercised discretion in a fair and

reasonable manner, the taxpayer may request in writing, that the Director of the TSO where the

original decision was issued, review and reconsider the original decision. The taxpayer has the

opportunity at that time to make additional representations for the CRAto consider. The CRAwill not

consider a request for a second review if a disclosure was denied because the information was not

previously submitted within the stipulated time frame.

58. The Director may designate a delegated authority, not involved in the previous review and

decision, to carry out the second administrative review on their behalf.

59. Where a taxpayer does not believe the Minister exercised discretion in a fair and reasonable

manner, the taxpayer may make an application to the Federal Court for a judicial review of the

Minister's discretionary decision, pursuant to section 18.1 of the Federal Courts Act, within 30 days

from the date the notification of the decision was communicated to the taxpayer.

60. To request a judicial review, the taxpayer must send a completed Form 301, Notice of

Application, with the appropriate filing fee, to the registrar of the Federal Court. For more information

on how to file an application for judicial review or other general enquiries, contact the Courts

Administration Service at 613-992-4238, or access their website at WW\,II/.c_aS::.SatJ,9c,ca.

61. If the Federal Court is of the view that the Minister's discretion was not properly exercised, the

CRA for reconsideration.

62. As a general rule, taxpayers should request a second administrative review from the CRAbefore

filing an application for a judicial review with the Federal Court.