CRA's New Voluntary Disclosures Program: A Second Chance for T1135 Non-Filers
Missed filing Form T1135 (Foreign Income Verification Statement) for your overseas accounts, stocks, or property? You are far from alone — it is one of the most commonly missed Canadian filings among newcomers who arrive with foreign assets. The good news: the CRA overhauled its Voluntary Disclosures Program (VDP) effective October 1, 2025, and the new rules are meaningfully friendlier to people who want to come clean, including those whose only sin is unfiled T1135s.
What changed: IC00-1R7 in plain language
The new policy (Information Circular IC00-1R7, plus GST/HST Memorandum 16-5-1) applies to applications received on or after October 1, 2025. Earlier files stay under the 2018-era IC00-1R6 rules. The core changes:
Two tiers of relief replace the old General/Limited programs:
- Unprompted (CRA had no specific knowledge of your non-compliance): generally 100% penalty relief and 75% interest relief.
- Prompted (you disclose after some CRA contact about the issue): generally up to 100% penalty relief and 25% interest relief.
Crucially, the bar for "voluntary" was relaxed. Under the old policy, almost any CRA contact could kill your application. Now, only an initiated audit or investigation (by the CRA or another authority, of you or a related taxpayer, about the disclosed information) makes you "not voluntary" and ineligible. A general education letter — or even a CRA letter asking you to fix something by a date — does not automatically disqualify you; it more likely lands you in the "prompted" tier with partial relief.
Clearer documentation expectations. Instead of documenting every year no matter how far back, the CRA now sets look-back periods by issue type:
- 10 years for foreign-sourced items (income or assets outside Canada)
- 6 years for Canadian-sourced income or assets
- 4 years for GST/HST matters
Form RC199 (the VDP application) was also shortened and simplified.
Why this is the T1135 article
The T1135 is the annual information return for specified foreign property over $100,000 (at any point in the year). The penalty for not filing is $25 per day up to $2,500 per year — and it applies even when no tax is owing, which is exactly why newcomers miss it: they owed nothing, so they assumed nothing was due.
Under the new VDP, a T1135-only disclosure maps neatly onto the most generous corner of the program:
- Foreign-sourced = 10-year look-back. Missing T1135s tied to offshore accounts, foreign rental income, or interests in non-resident corporations fall in the 10-year category. Gather statements for the most recent ten years (years with no error need not be included, but document why a year was excluded).
- Unprompted is achievable. If the CRA has never contacted you about the foreign property, your application is normally "unprompted": 100% penalty relief, 75% interest relief.
- Even prompted helps. Got a CRA letter asking about foreign assets? You can likely still file — expect the "prompted" tier (up to 100% penalty relief, 25% interest relief) rather than rejection.
Relief from criminal prosecution continues to be available where a VDP application is accepted.
What the VDP does not do
- It does not erase the tax itself — you still pay what was owing, plus the unrelieved slice of interest.
- It does not protect you if an audit or investigation has already started on the issue.
- It does not cover egregious non-compliance — deliberate, large-scale evasion is outside the tent.
- Filing a VDP application is itself a formal process with legal consequences; the CRA's acceptance is not guaranteed, and borderline cases (voluntary vs. prompted vs. not voluntary) are fact-specific.
Practical steps for a T1135 catch-up
- Inventory the foreign property for each year: accounts, stocks, real estate (other than personal-use property), interests in foreign corporations, debts owed by non-residents.
- Confirm the $100,000 threshold was met in each year (cost amount, at any time in the year).
- Assemble 10 years of records — statements, purchase documents, income slips. Note years where nothing was held or everything was filed, with brief reasons.
- Talk to a tax professional before filing. A VDP application, once submitted, discloses the non-compliance formally. Professional preparation of the RC199 and the narrative matters — especially the "prompted vs. unprompted" characterization.
- File before the CRA contacts you. Every week of delay risks moving you from the unprompted tier to the prompted tier, or worse.
Frequently asked questions
I never filed T1135 but I reported all the income. Do I still have a problem?
Yes — the T1135 is a separate information return with its own penalties. Reporting the income on your T1 does not satisfy the T1135 obligation.
How is this different from just filing the missing T1135s late?
Late-filing outside the VDP leaves you exposed to the full $25/day penalties with no relief framework. The VDP is the mechanism that can waive those penalties.
Does the VDP cover provincial tax too?
The federal VDP covers federal tax; provinces generally follow the federal acceptance for provincial purposes, but confirm with your province — and with your advisor — rather than assuming.
I got a CRA "education letter" about foreign property. Am I disqualified?
Not automatically under the new rules. A general education letter does not by itself make you "not voluntary" — your application may still qualify, likely in the prompted tier. Get advice quickly rather than assuming the door is closed.
Sources
- EY Tax News, Canada Revenue Agency announces streamlined Voluntary Disclosure Program (Oct 1, 2025 effective date, IC00-1R7, two tiers): https://taxnews.ey.com/news/2025-1917-canada-revenue-agency-announces-streamlined-voluntary-disclosure-program
- Mondaq/STEP, CRA Tightens VDP Rules For Non-Filers (unprompted vs prompted, 100%/75% and 100%/25% relief): https://www.mondaq.com/canada/tax-authorities/1851500/cra-tightens-voluntary-disclosures-program-vdp-rules-for-non-filers-in-june-2026-step-webinar
- Mondaq, How Far Back Can CRA Go In A VDP Application (10/6/4-year look-back periods): https://www.mondaq.com/canada/sales-taxes-vat-gst/1852732/how-far-back-can-cra-go-in-a-voluntary-disclosure-program-application-vdp-look-back-periods-tax-reassessments-and-older-tax-years
- FinancialContent, Canada Overhauls its Voluntary Tax Disclosures Program (expanded eligibility, RC199 simplification): https://markets.financialcontent.com/ibtimes/article/abnewswire-2025-11-5-canada-overhauls-its-voluntary-tax-disclosures-program
This article is general information about the CRA's Voluntary Disclosures Program, not tax or legal advice. VDP applications have formal legal consequences and borderline eligibility questions — consult a licensed Canadian tax professional or tax lawyer before filing.