Purpose and Application
A clearance certificate confirms all tax liabilities of an entity are paid when it ceases to exist or transfers ownership. This also applies when settling estates of deceased individuals. Clearance certificates are common in Canada, the UK, Ireland, and some US states. They verify no outstanding tax debts or obligations exist.
To apply for a clearance certificate, an executor fills out Form TX19 and files it with documents including the will, estate asset statement with cost base, and proof they are the legal representative. Expect a six-month wait for the CRA to process it.
Various Uses
Clearance certificates also apply when a business liquidates assets held under its corporate name. Some countries require them when selling property to confirm no tax lien exists, benefiting the buyer.
Travel clearance certificates validate a citizen can leave and re-enter their home country but aren’t required for entry elsewhere. Unlike visas that permit foreign entry and stays, clearance certificates cost less as home countries issue them.
Employers issue certificates detailing employee start and end dates and types of work upon termination. This isn’t a full clearance but does provide basic details. Separate procedures have employees return company property and access.
Utility for Tax Authorities
Tax authorities use clearance certificates to confirm individual and organizational compliance across all tax types. This helps determine if people and companies have paid applicable taxes or have none due when leaving the country.