What Does CRA Check Before Issuing a Clearance Certificate in Canada?

An executor who applies for a clearance certificate is asking CRA to confirm that the deceased's and the estate's tax is dealt with. Understanding what CRA looks at helps you prepare, avoid delay and judge whether an audit is likely to be part of the process.

This article walks through the main steps of the review. It is general information, and CRA's processes and timelines can change, so a lawyer or accountant can help you with your specific file.

This article covers Canadian federal tax law, which applies in every province.

Why the review matters to you

Before distributing property in their possession or control, a legal representative (other than a trustee in bankruptcy) must obtain a certificate from the Minister, applied for in the prescribed form, that the relevant amounts have been paid or secured. A legal representative who distributes property without the certificate is personally liable for the unpaid amounts, limited to the value of the property distributed.

That liability applies whether the amounts are assessed before or after the actual distribution, and interest accrues. Once a certificate is issued, liability for any remaining tax rests on the estate, trust, corporation, beneficiaries or others who received the assets, rather than the representative.

Returns must be filed and assessed first

CRA does not issue the certificate for an estate unless the required returns are filed and assessed and all amounts are paid or secured. You should apply only after the returns are filed and the notices of assessment are received, and after any requested reassessments are received.

Do not submit the request together with the tax returns, because that delays their assessment. The required returns include the estate's T3 returns. The T3 return is due 90 days after the trust's tax year-end, or after the final distribution if the trust ceases to exist. A late T3 may also attract a separate penalty of $25 per day, minimum $100 and maximum $2,500, even with no balance owing.

Balances owing, interest and security

All income taxes, including provincial or territorial taxes that CRA administers, CPP contributions, EI premiums, interest and penalties must be paid or secured before you apply. The certificate may also issue where CRA has accepted security for payment.

CRA does not set out the form or amount of acceptable security on its certificate pages, so contact CRA first if you plan to rely on it. The certificate is generally not issued if the estate cannot cover all tax, interest and penalties owing.

Payroll source deductions and other program accounts are not separately addressed in CRA's guidance, so if the deceased ran a business, ask CRA or an accountant how those accounts are handled.

The documents CRA asks for

For an estate, the request is made on Form TX19, with Form GST352 as well if there is a GST/HST number. The attachments include:

If CRA later asks for more information, include a cover page with the name of the requesting officer and their tax services office.

For an intestate estate, the clearance certificate request requires the administrator appointment, such as letters of administration or verification. The legal representative is typically the executor named in the will, and in Quebec the person registered as liquidator.

Timing and the chance of an audit

CRA acknowledges the request within 45 days. Assessment can take up to 120 days if all documents are provided, and an audit may be needed first. These are CRA targets and can change.

Whether an audit happens depends on the file, so it is worth confirming with a lawyer or accountant what to expect for yours. If no certificate has arrived, it was denied, or no officer has contacted you within 120 days, you can phone CRA. A denial states what is missing or what action is required, and you can reapply once the issues are resolved.

What to do next

• Confirm that every required return, including T3 returns, is filed and assessed.
• Pay or arrange security for any balance owing.
• Prepare the asset list, statement of distribution and proof of your status.
• Submit through Represent a Client or My Account, or mail or fax the regional tax services office.
• Keep the certificate and check whether new assets later require another one.

Frequently asked questions