Clearance Certificate

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Estate Tax

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

    A tax that governments impose on financial income generated by ...
  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. ...
RELATED FAQS
  1. In what instances does overhead qualify for certain tax allowances?

    Businesses are just as keen as anyone else to keep their tax burdens low by any means possible. Overhead expenses often qualify ... Read Full Answer >>
  2. How are write-offs recorded on my tax return?

    The way your write-offs are recorded on your tax return varies depending on whether you are filing a personal or business ... Read Full Answer >>
  3. How does the trust maker transfer funds into a revocable trust?

    Once a revocable trust is created, a trust maker transfers funds or property into the trust by including them in a list with ... Read Full Answer >>
  4. How exactly does one go about revoking a revocable trust?

    The basic steps involved in revoking a revocable trust are fairly simple, and include transfer of assets and an official ... Read Full Answer >>
  5. What are the benefits of prorating expenses?

    When a person prorates expenses between personal and business expenses, he is able to capture the maximum amount of tax benefits ... Read Full Answer >>
  6. How can I tell which of my business expenses count as write-offs?

    Any basic, reasonably necessary expenses incurred in running a business can be considered possible write-offs. Such expenses ... Read Full Answer >>
Related Articles
  1. Entrepreneurship

    Prepare To Sell Your Business

    Follow these tips to ensure you get the most out of your hard work.
  2. Retirement

    6 Estate Planning Must-Haves

    You need an estate plan even if you don't have significant assets. Learn what you need to include in yours.
  3. Entrepreneurship

    Getting To Know Business Models

    Learning how to assess business models helps investors identify companies that are the best investments.
  4. Taxes

    3 Common Tax Questions Answered

    We clarify some rules that often puzzle taxpayers.
  5. Entrepreneurship

    Why Successful Business Owners Sell Out

    Learn the motives that drive companies into the arms of an acquirer.
  6. Personal Finance

    Get Ready For The Estate Tax Phase-Out

    Changes to federal legislation will affect how your assets are treated once you're gone - be prepared.
  7. Taxes

    An in Depth Look at How Inheritances Are Taxed

    The tax implications of an inheritance can be complex. Here's what beneficiaries need to know.
  8. Taxes

    5 Signs It's Time to Hire an Estate Manager

    If managing multiple properties (or just one large estate) is taking up too much of your time, you can hire your way back to sanity.
  9. Personal Finance

    10 Questions to Ask Your Estate Planning Attorney

    If you want what's best for your spouse and/or children, it's imperative that you ask an estate planning attorney the following questions.
  10. Taxes

    A Quick Guide to High-Net-Worth Estate Planning

    A quick estate planning guide for high-net-worth individuals to help minimize taxes and costs, protect assets and plan for care.

You May Also Like

Hot Definitions
  1. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  2. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  3. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  4. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  5. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  6. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!