GST/HST Clearance Certificate

A GST/HST clearance certificate is a document issued by the Canada Revenue Agency confirming that a business has no outstanding GST/HST obligations. In the context of a business acquisition, the buyer should obtain a clearance certificate from the CRA before closing to avoid personal liability for the seller's unpaid GST/HST up to the amount of the purchase price.

The clearance certificate mechanism is governed by section 270 of the Excise Tax Act. The buyer applies for the certificate using CRA form GST352. Without a clearance certificate, a buyer who pays the seller before receiving CRA confirmation that all HST is remitted may become jointly liable for the seller's outstanding tax balances.

A separate income tax clearance certificate under section 159 of the Income Tax Act protects the buyer from the seller's unpaid income taxes in asset purchases. Both clearance certificates should be obtained before releasing purchase price proceeds.

See also: Due Diligence, Asset Sale, Closing.