When Can an Executor Apply for a Clearance Certificate in Canada?

Filing the final return feels like the finish line, but for an executor it is usually not the last tax step. Before property is handed to beneficiaries, the Canada Revenue Agency (CRA) expects you to deal with the clearance certificate, and the timing of your request matters.

This article explains when the CRA will accept a request after the final return, what has to be in place first, and what to do while you wait. Every estate is different, so a lawyer or accountant can confirm how this applies to yours.

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

Why the certificate matters before you distribute

A clearance certificate confirms that an estate has paid all income tax, GST/HST, interest and penalties owed at the time it was issued, or that the Minister has accepted security for payment. Before distributing property in their possession or control, a legal representative must obtain this certificate, applied for in the prescribed form.

If you distribute without it, you can be personally liable for the unpaid amounts, limited to the value of the property distributed, and the Minister may assess you for that amount at any time. That is why the question is not only whether you can apply, but whether you have applied before property leaves your control.

The conditions that must be met first

The CRA does not issue the certificate for an estate unless the required returns are filed and assessed and all amounts are paid or secured. Apply only after each of the following has happened:

• The required returns are filed and you have received the notices of assessment.
• Any reassessments you requested have been received.
• All income taxes (including provincial or territorial taxes the CRA administers), CPP contributions, EI premiums, interest and penalties are paid or secured.
• Legal documents proving your status as representative are submitted with the request.

In practical terms, filing the final return is only the first condition. You then wait for the notice of assessment, and you pay any balance or arrange security, before the request is ready.

Do not send the request with the returns

The CRA says not to submit the clearance request together with the tax returns, because doing so delays their assessment. The CRA circular on clearance certificates also says not to file Form TX19 until the notices of assessment are received, subject to exceptions listed in the circular.

Those exceptions have conditions, so if you think your situation might fit one, ask a lawyer or accountant, or the CRA, before relying on it.

Other returns and accounts that can hold things up

The final return may not be the only return. A certificate is issued only when the required returns, which include the estate's T3 returns, are filed and assessed and amounts are paid or secured. A T3 return is due 90 days after the trust's tax year-end, or after the final distribution if the trust ceases to exist.

Earlier years matter too. Previous-year returns generally keep their original due dates, so earlier unfiled years may already be late. A late-filing penalty with a balance owing is 5% of the balance plus 1% for each full month late up to 12 months. A late T3 return may also attract a separate penalty even with no balance owing.

If the deceased had a GST/HST number, the estate also needs a GST/HST certificate before distributing, and the representative is otherwise personally liable up to the value distributed. Form TX19 is used for estates, and Form GST352 is also needed if there is a GST/HST number. Payroll and other program accounts are not clearly covered by the certificate, so it is worth checking those with the CRA.

What happens after you apply, and when you may be refused

The CRA acknowledges the request within 45 days, and assessment can take up to 120 days if all documents are provided, though an audit may be needed first. These are targets and can change. If no certificate has arrived, it was denied, or no officer has contacted you within 120 days, you can phone the CRA.

If the request is denied, the notice states what is missing or what action is required, and you can reapply once the issues are resolved. The certificate is generally not issued if the estate cannot cover all tax, interest and penalties owing. Tax not yet paid can be secured instead, but the acceptable form is not set out, so contact the CRA first.

A certificate covers only property controlled up to the request date. If new assets are found later, you must obtain another certificate before distributing them.

What to do next

• Confirm the final return and any other required returns, such as T3 returns, are filed.
• Wait for the notices of assessment before sending the TX19 request.
• Pay or arrange security for all tax, interest and penalties.
• Gather the will, probate or administrator appointment, proof of your status, and a detailed asset list.
• Include a statement of distribution to date and any proposed holdback.
• Submit online through Represent a Client or My Account, or by mail or fax to your regional tax services office.

You do not need a certificate before each distribution if enough property remains to cover any liability, which is the basis for a partial distribution with a holdback. Whether enough property remains in your estate depends on your situation, so it is worth confirming with a lawyer or accountant before you distribute.

Frequently asked questions