CLEARANCE CERTIFICATES & TAXES

A Clearance Certificate is issued by the CRA when all the deceased tax obligations have been met and there is no amount owing to the government. This includes federal and provincial taxes and interest and penalties.

The main purpose of a clearance certificate is to show that the deceased no longer owes any monies to the government. Another purpose is to notify the legal representative of the estate that they may disperse any property or assets. Should a legal representative disperse the estate without obtaining the clearance certificate, he/she will be legally obliged to pay for any unpaid taxes of the estate.

As it goes when a person passes away, the same principal applies when a corporation is dissolved. To distribute any remaining assets. The corporation must obtain a clearance certificate before it dissolves. Failing to obtain one before distribution can hold shareholders accountable for any remaining tax liabilities against the corporation. A partial clearance certificate can be issued by the CRA ONLY if closure of the articles of dissolution is pending and there is full intent to dissolve the corporation.

The same goes with any taxpayers who have a GST/HST account with the CRA. A deceased taxpayer or dissolving company who has collected GST/HST has to obtain a separate second clearance certificate.

The definition of legal representative for a deceased taxpayer is “a person who administers, controls and deals with the property of the deceased or dissolved taxpayer” An example is an executor/executrix, corporate director or an heir.

This is general comment, and you should contact Tax Partners for any questions by sending an email to info@taxpartners.ca or (905) 836-8755.

 

 

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