Additional difficulties can arise in making a VDP disclosure on behalf of a deceased taxpayer

Additional challenges often arise where a voluntary disclosure is made by an executor in respect of a deceased taxpayer:

• In light of the requirement to make payment of the unpaid taxes with submission of the disclosure package, the estate funds might be in an offshore account, payments from which would trigger international reporting to CRA (thereby alerting it prematurely, i.e., before submission of the package).
• Making a voluntary disclosure generally will result in the estate owing more tax, which could increase potential liability to the executor under s. 159 or 160.
• The executor may often lack information regarding the extent of the non-disclosure by the deceased, for example, how long an offshore account was held or how much income was generated therefrom, thereby creating a risk that CRA may not consider that its requirement for reasonable efforts to estimate income for the voluntary disclosure has been satisfied.
• The executor may not be aware of the reasons why the deceased had not fully complied with the applicable tax obligations and, therefore, may not be in a position to demonstrate that the disclosure should be accepted under the more favourable general program.
• IC00-1R6 states that enforcement action taken against a taxpayer will also invalidate the voluntariness of disclosure by related taxpayers, including those related through trust-specific relationships. Accordingly, in a situation where voluntary disclosure by an estate is also required, for example, where an undisclosed offshore account was not identified until a number of years after the death, a non-compliance letter issued by CRA to the estate (or the deceased) will invalidate the pending voluntary disclosure by the deceased (or the estate).

Neal Armstrong. Summary of Dean Blachford and Ella Sui, “Filing a Voluntary Disclosure for a Deceased Taxpayer,” Tax for the Owner-Manager, Vol. 25, No. 2, April 2025, p. 14 under s. 220(3.1).