Getting a clearance certificate for GST/QST is one of the most important steps when selling business assets in Quebec. Whether you are selling equipment, inventory, real estate, intellectual property, or an entire operating division, Quebec tax law requires both the buyer and the seller to protect themselves from outstanding GST/QST liabilities. Without a clearance certificate, the purchaser may become legally responsible for the seller’s unpaid sales taxes. This can result in thousands of dollars in unexpected liabilities and trigger a post-closing audit by Revenu Québec. This guide explains how to obtain a GST/QST clearance certificate, why it is necessary, and how to ensure the transaction is fully compliant.

A clearance certificate provides confirmation from Revenu Québec that the seller’s GST/QST account is in good standing, that no amounts are owed, and that the buyer can proceed without risk. It is essential in business asset sales, business transfers, bulk sales, and significant liquidation events. Properly managing the clearance certificate process protects both parties and ensures a smooth closing.

LEGAL AND REGULATORY FRAMEWORK

The requirement for a GST/QST clearance certificate is based on sections of the Quebec Taxation Act and the Excise Tax Act that govern bulk sales and business asset transfers. When a business sells all or a substantial portion of its assets, Revenu Québec may hold the purchaser liable for unpaid GST/QST unless the purchaser obtains a formal clearance from the tax authority. This rule exists to prevent businesses from selling assets and disappearing without remitting collected taxes.

Clearance certificates are required when selling assets used in commercial activity, including machinery, buildings, equipment, vehicle fleets, and inventory. The seller must provide financial information, GST/QST account details, outstanding filing obligations, and recent remittance history. Revenu Québec reviews the account and issues confirmation if no amounts are outstanding. If returns are missing or amounts are unpaid, the certificate will be delayed until compliance is complete.

KEY COURT DECISIONS

Courts in Quebec have repeatedly upheld that purchasers may be held responsible for the seller’s unpaid GST/QST when a clearance certificate is not obtained. In several rulings, purchasers were reassessed for the seller’s tax debts because they failed to perform due diligence. Judges emphasized that the law is strict: without a clearance certificate, liability transfers automatically.

Other decisions show that sellers cannot avoid GST/QST obligations by liquidating assets quickly. Revenu Québec can reassess both parties if taxes were not reported correctly on the transaction. These cases highlight the importance of obtaining a clearance certificate before closing any significant business asset sale.

WHY CRA AND REVENU QUÉBEC TARGET THESE ISSUES

Revenu Québec focuses on bulk sales and asset transfers because these transactions pose a high risk of unpaid GST/QST. When a business sells assets or dissolves, tax authorities act quickly to ensure all trust taxes are collected. Red flags that trigger clearance reviews include missing GST/QST returns, inconsistent remittances, outstanding balances, sudden liquidation of assets, and changes in ownership structure.

If a clearance certificate is requested late or incomplete, Revenu Québec may delay issuance until they review the seller’s full tax file. For buyers, failing to request a clearance certificate can result in major unexpected liabilities, including amounts owed from several years prior.

MACKISEN STRATEGY

Mackisen CPA assists buyers and sellers in obtaining GST/QST clearance certificates quickly and accurately. Our first step is conducting a compliance check of the seller’s GST/QST account to identify missing filings, unpaid balances, or discrepancies. We prepare and submit the clearance request to Revenu Québec, ensure all required documentation is included, and follow up with the tax authority until the certificate is issued.

For sellers, we review historical filings, reconcile GST/QST accounts, correct errors, and file outstanding returns before submitting the clearance request. For buyers, we incorporate clearance certificate requirements directly into the purchase agreement and ensure that closing is contingent upon receiving confirmation from Revenu Québec. Mackisen also assists in structuring the sale to minimize GST/QST exposure and to comply with exemptions such as the sale of a business as a going concern.

REAL CLIENT EXPERIENCE

A Montreal distribution company sold most of its operating assets to a competitor. The purchaser did not insist on a clearance certificate. Months later, Revenu Québec reassessed the buyer for more than thirty thousand dollars of unpaid GST/QST owed by the seller. Mackisen negotiated a partial reduction but the buyer still paid a significant amount. This case underscored the necessity of proper clearance procedures.

A technology company selling its equipment and software platform obtained Mackisen’s help before listing the assets. We identified missing GST/QST returns, corrected errors, and brought the account into full compliance. The clearance certificate was issued quickly, and the sale closed smoothly.

A professional services firm sold its client list and office equipment. Revenu Québec initially delayed the clearance certificate due to mismatched filings from previous years. Mackisen prepared a full reconciliation and successfully secured the certificate within two weeks.

COMMON QUESTIONS

When is a GST/QST clearance certificate required
Whenever a business sells all or a substantial portion of its assets, including bulk sales, liquidations, and business transfers.

Who requests the clearance certificate
Typically the purchaser, but the seller must provide financial and tax information to complete the request.

How long does it take to receive the certificate
It depends on whether the seller’s GST/QST accounts are up to date. Fully compliant files may receive clearance in days.

Can the sale close without a clearance certificate
Legally yes, but it is highly risky. The purchaser may become liable for unpaid GST/QST.

Does a clearance certificate apply to a share sale
Generally no. Clearance certificates are for asset sales, not share transactions.

WHY MACKISEN

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps buyers and sellers manage GST/QST risks during business asset sales. Whether you are preparing for a bulk sale, selling equipment, or transferring operations, our expert team ensures precision, transparency, and protection from unexpected tax liabilities.