A tax clearance certificate is a certificate issued by the tax office that confirms your tax affairs are in order - that you have 'maintained proper accounts for tax purposes and met all obligations relating to the payment of tax and the delivery of tax returns'. If your tax affairs are not up to date, and fully discharged, you will not be issued with tax clearance.
C2 is a Revenue issued certificate that verifies a sub-contractor's tax status and authorises contractors to pay costs gross. Where you are dealing with a construction contract and the sub-contractor has a C2 certificate, this will do in place of a Tax Clearance Certificate.
Under Department of Finance regulations public bodies such as government departments, health boards and local authorities which provide grants or subsidies must ensure that the recipients of grants satisfy the regulations in relation to tax clearance.