What is the purpose of a tax clearance certificate?

The purpose of a tax clearance certificate is primarily to certify that a taxpayer is up to date with their tax obligations. This certificate serves as official documentation indicating that all due taxes have been paid and that the taxpayer has no outstanding tax liabilities. Businesses and individuals often need to present a tax clearance certificate when applying for loans, government contracts, permits, or licenses, as it assures those involved that the taxpayer is compliant with the tax system.

The other options presented do not align with the function of a tax clearance certificate. Certifying compliance with labor laws, granting tax exemptions, or certifying income levels are distinct processes and do not specifically address the confirmation of tax payments or obligations, which is the core purpose of the tax clearance certificate.