Clearance Certificate


DEFINITION of 'Clearance Certificate'

A certificate that verifies that an entity has paid all its tax liabilities at the time that the entity ceases to exist or is transferred to a new owner. A clearance certificate is not required in all jurisdictions.

BREAKING DOWN 'Clearance Certificate'

There are many different situations to which a clearance certificate may apply. A business may be required to obtain an income tax clearance certificate when it decides to dissolve. An estate whose assets have a high value may be required to obtain an estate tax clearance certificate when the estate owner dies and the estate's assets are distributed to heirs. A sales tax clearance certificate allows someone purchasing an existing business to ensure that they will not be responsible for any unpaid sales taxes upon becoming the business' new owner.

  1. Sales Tax

    A consumption tax imposed by the government on the sale of goods ...
  2. Income Tax

    A tax that governments impose on financial income generated by ...
  3. Estate Tax

    A tax levied on an heir's inherited portion of an estate if the ...
  4. Tax Rate

    The percentage at which an individual or corporation is taxed. ...
  5. Tax Liability

    The total amount of tax that an entity is legally obligated to ...
  6. Personal Representative

    The executor or administrator for the estate of a deceased person. ...
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  1. What causes a stock account to be escheated?

    Your state government may be able to escheat your stock account or another financial asset if the account or asset is deemed ... Read Full Answer >>
  2. Are 401(k) accounts escheatable?

    Typically, 401(k) plans are not subject to state escheatment laws because they are covered under the Employee Retirement ... Read Full Answer >>
  3. Are IRA accounts escheatable?

    Traditional IRA accounts, like any other financial asset held at a bank, investment or brokerage firm, can be escheated by ... Read Full Answer >>
  4. How can I avoid escheatment of my bank account?

    To avoid escheatment of a bank deposit account, either checking or savings, the owner should log on to his online account; ... Read Full Answer >>
  5. Are checks escheatable?

    Checks of different kinds, such as travelers checks and payroll checks, can become unclaimed property after a certain period ... Read Full Answer >>
  6. What financial assets can be escheated?

    Any financial assets you hold at a bank or investment or brokerage firm can be escheated by the state government if your ... Read Full Answer >>

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