Does a tax indemnity only cover CRA reassessments for years before closing, or later years too?

Most tax indemnities in an Ontario business purchase and sale are drafted specifically to cover tax liabilities and CRA reassessments attributable to periods before closing, since the seller was the one in control of the business, and its tax filings and positions, during that time. Once the buyer takes over, it is generally responsible for the corporation's own tax compliance and any reassessment relating to its own post-closing conduct, so a tax indemnity typically is not, and would not usually be expected to, extend to genuinely post-closing tax years.

Where things can get less clear-cut is a reassessment that spans a period straddling the closing date, or one that stems from a position the seller took that continues to affect filings after closing — these situations depend heavily on how the indemnity is drafted to allocate responsibility around the closing date itself. Because tax indemnities interact closely with the survival period, any holdback tied to tax risk, and the corporation's actual filing history, this is an area where working through the exact drafting with both a Treadstone business lawyer and an accountant pays off.