Introduction and purpose
Effective October 1, 2025 there will be changes in Canada’s Voluntary Disclosures Program (VDP). The changes may make it easier to correct mistakes related to Form T1135. A general description of the new program is here
Form T1135 – Some background.
In 2019 I wrote a series of posts about Canada’s T1135 requirement. In simple terms, Canada’a T1135 form is where tax residents of Canada report their “Foreign Property” to the Canada Revenue Agency. Form T1135 is a combination of the U.S. FBAR and Form 8938 requirements. “Foreign Property” is defined in S. 233.3(1) of the Income Tax Act of Canada. A summary from the Canada Revenue Agency is here. It would be prudent for all tax residents of Canada to read this carefully. The penalties for failure to file Form T1135 are significant. Notably the requirement to file Form T1135 is independent of whether any taxable income is generated from the foreign property. It is likely that there are many tax residents of Canada who are unaware of this requirement.
Historically, fixing T1135 noncompliance has been achieved through Canada’s “Voluntary Disclosures Program”.
Prior to October 1, 2025 – A general description of the Voluntary Disclosures Program
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/ic00-1/ic00-1r6-voluntary-disclosures-program.html
From October 1, 2025 – Canada’s new Voluntary Disclosures Program – Correcting unintentional filing errors and omissions such as Form T1135
Effective October 1, 2025 the Canada Revenue Agency will be administering a new and simplified “Voluntary Disclosures Program (VDP)”. Generally the program will be more accessible than in previous years. The announcement is here. The Canada Revenue Agency description is here.
Specific information about Canada’s Voluntary Disclosures Program effective October 1, 2025
The information is in Circular IC00-1R7 which sets out the new rules effective October 1, 2025.
Why the new Voluntary Disclosures Program may provide welcome relief to Canadians
On September 10, 2025 in a media release, the Government of Canada’s description of the new program included:
Made a mistake on your taxes? Upcoming changes to the Voluntary Disclosures Program
The Canada Revenue Agency (CRA) is committed to helping taxpayers correct their past tax mistakes. The Voluntary Disclosures Program (VDP) allows for well-intentioned taxpayers to voluntarily correct their tax affairs and receive some financial relief.
On October 1, 2025, changes to the VDP will come into effect. These changes will make it easier to correct unintentional filing errors or omissions and make the program more accessible.
The program remains focused on providing relief that is fair and does not reward non-compliance. Taxpayers who use the program will not receive relief that puts them in a better financial position than those who comply with tax rules from the start.
When you voluntarily correct your tax mistakes and pay what you owe:
– you will have peace of mind that you comply with tax rules
– you will support other Canadians by contributing to revenue generation for benefits and credits
The complete description is here.
Initial commentary ..
It is very early. Generally, the new program appears to be more “user friendly” and designed to bring taxpayers into the system. I recommend this commentary from McMillan that includes:
Background/History
The amendments mark a return to a simpler approach to voluntary disclosures and are presumably intended to address a reduction in VDP applications in recent years caused by overly strict criteria. It appears that the changes endeavour to encourage tax compliance (not only curing the past but also bringing taxpayers into the tax system going forward) and increase the collection of tax revenues that could otherwise be lost to the Government.
New IC00-1R7 and GST/HST Memorandum 16-5-1 strike a better balance between simplicity and certainty. Most significantly, by relaxing the “voluntary” criteria, new IC-007 and GST/HST Memorandum 16-5-1 represent a significant expansion of eligibility as compared to the last two iterations of the program.[9]
It is worth noting that the new VDP does not reintroduce the “No-Name” Disclosure Method that was previously available under IC00-1R5, which allowed the CRA to confirm that an application did not contain anything disqualifying, and even advise on the possible tax implications of disclosure, prior to the identity of the taxpayer being revealed.[10]
Overall, the new changes appear to be very positive for taxpayers. However, the proof of the pudding will ultimately be in the eating.
If you need help fixing a T1135 mistake:
John Richardson – Follow me on X.com @ExpatriationLaw
Appendix – A series of posts about the Form T1135 requirement from 2019
Part 1 – Like FBAR, Form 8938, Form 3520 and Form 5471 – Canada has its own foreign asset reporting rules
Like FBAR, Form 8938, Form 3520 and Form 5471 – Canada has its own foreign asset reporting rules
Part 2 – A Canada Form T1135 Primer – Parsing the language and understanding the basic reporting requirement
A Canada Form T1135 Primer – Parsing the language and understanding the basic reporting requirement
Part 3 – A Form T1135 Primer – How to complete and file Form T1135
Part 4 – Failure to file Canada Foreign Property Returns – #T1135 – Penalties and voluntary disclosure
Failure to file Canada Foreign Property Returns – #T1135 – Penalties and voluntary disclosure
Part 5 – The Moore case – A recent Form #T1135 taxpayer victory
Part 6 – Canada’s new “Voluntary Disclosures Program” – Effective October 1, 2025
Change In Canada Voluntary Disclosures Program And Avoiding T1135 Penalty