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A clearance certificate will allow you, as the legal representative, to distribute assets without the risk of being personally responsible for unpaid amounts the person who died, estate, trust, or corporation might owe to the CRA. Your financial institution or lawyers may also ask you for a clearance certificate.
Having a clearance certificate confirms that an estate of a person who died, trust, or corporation has paid all amounts of income tax and GST/HST, interest, and penalties it owed at the time the certificate was issued, or that the Minister of National Revenue has accepted security for the payment.
A purchaser who has committed to purchasing the business or stock of goods of a seller may submit Form AU-866, Request for a Tax Clearance Certificate, to the Department of Revenue Services (DRS). The DRS will issue a tax clearance certificate or escrow letter within sixty (60) days of receipt of Form AU-866.
Under successor liability, the purchaser of a business is liable for the taxes of the previous owner to the extent of the purchase price of the business unless the purchaser obtains a tax clearance certificate from DRS. Successor liability applies where: A person voluntarily sells a business; or.
A tax clearance certificate is a document issued by a state government agency, usually the department of revenue. It certifies that a business or individual has met their tax obligations as of a certain date.