CRA clearance certificate (s. 159)
A CRA clearance certificate certifies that all amounts the taxpayer is, or can reasonably be expected to become, liable for under the Income Tax Act at or before the time of distribution have been paid, or that the Minister of National Revenue has accepted security. Subsection 159(2) requires a legal representative to obtain one before distributing property.
The CRA’s IC82-6R13 explains that subsection 159(2) requires a legal representative to obtain a clearance certificate before distributing property controlled in that capacity. The circular says a legal representative includes an executor, an administrator, a liquidator, a receiver of any kind and a trustee other than a trustee in bankruptcy, and that the facts of each case decide whether a person is one.
Why it matters in a sale
The CRA says a legal representative who distributes property without a certificate is liable for unpaid amounts. It adds that a certificate is not needed before each distribution if enough property is kept back to pay any liability, and that the request is made on Form TX19. If the seller is an estate or a business in receivership, ask whether the representative has applied and how the agreement handles the timing, as in this answer on a delayed clearance certificate. It is a different document from a WSIB clearance certificate.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Canada Revenue AgencyGovernmentIC82-6R13 Clearance Certificate
- 02Canada Revenue AgencyGovernmentRepresent someone who died
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