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. Income Tax

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

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

    The total amount of tax that an entity is legally obligated to ...
  4. Sales Tax

    A tax imposed by the government at the point of sale on retail ...
  5. Tax Rate

    The percentage at which an individual or corporation is taxed. ...
  6. Personal Representative

    The executor or administrator for the estate of a deceased person. ...
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