The concept of dormant companies in Singapore is nothing new. Upon the incorporation in Singapore, your company can be put into a dormant status to achieve exemptions from certain compliance requirements.
Table of Contents
1. An overview of a dormant company in Singapore
A dormant company is one that is temporarily suspended. However, going dormant does not necessarily mean that a company completely stops carrying out its business activities.
In other words, you can define a dormant company in Singapore as a company that conducts no significant business activities for a given period. It means that it still can do transactions under certain conditions. This will be later mentioned in the blog. Stay tuned!
There are a couple of reasons why business owners go for dormant status once in a while.
The most common reason lies in the company’s maintenance requirements. A dormant company in Singapore has a simplified set of compliance requirements to follow. It can even qualify for exemptions for certain requirements. This saves you tons of resources and time to invest more in building a good business plan for the future.
Moreover, putting a company in a dormant status, rather than ending it, can help you safeguard your company’s brand name, reputation as well as other valuable assets and intellectual properties.
2. ACRA and IRAS’s definition of a dormant company in Singapore
Under the Singapore legislation, whether a given company is dormant or not is left to the discretion of ACRA and IRAS. The first authority is in charge of the registration of all companies and businesses in Singapore, while the latter is responsible for all tax matters in the nation.
The two authorities have different ways to define a dormant company in Singapore. So, chances are your company can be eligible to be dormant according to ACRA, but may fall short of the IRAS’s criteria, and vice versa.
Understanding this radical difference is very important as ACRA and IRAS grant dormant companies exemptions under different sets of conditions.
2.1. ACRA’s definition of a dormant company in Singapore
ACRA defines a dormant company as one that conducts no accounting transactions for a given financial period. However, your company in Singapore can still carry out certain transactions while remaining a dormant status. These transactions are allowed only when their sole purpose is to help the company cover the compliance cost or certain administrative expenses. Noticeably, these transactions exclude:
- The expense associated with the appointment of your company secretary or an auditor.
- The cost to maintain the registered office
- The payment of penalties, fees, and fines to ACRA
- The cost to maintain books and registers
Once your company is recognized as dormant by ACRA, it is exempted from the requirements of preparing financial statements.
2.2. IRAS’s definition of a dormant company in Singapore
According to IRAS, a company is a dormant company when it generates no income, even if it may incur expenses at one point or another.
Following being seen as dormant by IRAS, your company can dispense with annual tax return filing.
3. Filing requirements for a dormant company in Singapore
For administrative purposes, a dormant company in Singapore still need to fulfill several filing requirements:
Filing annual returns with ACRA
Even if your company has entered into dormant mode, ACRA will still ask for your annual return. According to what they have specified, this form must be electronically filed and be prepared by a director, company secretary, or registered filing agent of the dormant company.
That being said, your dormant company is allowed, and advised, to opt for the simplified annual return via BizFile+ Portal or the ACRA-On-The-Go mobile application. If you have access to neither of them, you should now go register for one.
In order to be eligible for the simplified version, your company must fulfill the following criteria:
- Your company must have been declared a “private dormant relevant company” – one that is neither a listed company nor is a subsidiary of a listed company, since the preceding annual return
- Your company is not in the process of filing the audited financial statements
- Your company is dispensed from filing financial statements with ACRA
- Your company’s Financial Year End (FYE) is on or after 31 August 2018
- Your company’s information registered with ACRA remains non-modified
In case that your dormant company is not a listed one, you must submit its annual returns within 7 months since the end of FYE. On the contrary, given that your dormant company is listed, you must submit the annual returns in less than 5 months since the end of FYA.
Filing tax returns with IRAS
For the most part, a tax return is a necessity as it is the basis for computing taxes. Yet under certain conditions, you can apply to IRAS for a waiver.
There are typically 2 ways to fulfill this obligation, either e-filing using myTax portal or submitting a copy of the Form C-S/C.
It should be well-noted that IRAS is set to eliminate the paperwork-based option in YA 2020. So if you do not have a CorpPass or SingPass, you are better off registering one now.
4. Requirement exemptions for a dormant company in Singapore
Your dormant company could apply for a waiver from filing an annual tax return or preparing financial statements when it fulfilled certain criteria as laid down by ACRA or IRAS.
Exemption from filing annual tax returns
Once IRAS deems you a dormant company, you can go seek exemption from filing the tax return (in Form C or Form C-S). However, you would be subject to several demanding requirements, which are detailed as below:
- You must have submitted a complete financial statement and tax return by the time your company comes to a halt.
- Your company should not own any investment. But if it does, these investments must not derive any profits whatsoever.
- You can demonstrate that the company would conduct no business transactions for the next 2 years
- You must have de-registered your Goods and Services Tax (GST) (if appropriate)
- You can submit the application online using myTax Portal, or directly send a hardcopy form to IRAS.
Exemption from preparing financial statements
A dormant company is exempted from preparing financial statements as long as it fulfills the following criteria:
- Your company is neither a listed company nor a subsidiary of a listed company
- Your company satisfies the substantial assets test where its total assets do not exceed S$500,000. Note that your assets would be evaluated on a consolidated basis if it is a subsidiary of a group company
- Your company has been dormant since the end of the previous financial year
>> Do you feel the need to put your company in a dormant status? Contact us now!
5. Application for the cessation of dormant status
Once you resolve to reactivate your company, that is, it resumes its business activities and starts to handle transactions, you need to notify IRAS of your intention within 1 month after you recommence the business or start earning incomes. The notification can be made by emailing IRAS, and must include the following particulars:
- Subject header: “Recommencement of business and request for Income Tax Return”
- Name and Unique Entity Number (UEN) of the company;
- Date of the recommencement of business and new principal activity (if applicable); and
- Date of receipt of other sources of income e.g. interest, dividend, rent, etc. (if applicable)
6. How to close a dormant company in Singapore
At some points and for some particular reasons, you may change your mind and want to close the dormant company.
If you decide so, applying for striking off would be your most appropriate way to close down your dormant business. You can simply submit an application to ACRA stating your wish to have your company’s name struck off the register of companies. The application must be filed by your company secretary, director or your registered filing agent. Also, it can be e-submitted via Biz File Portal.
Upon approval, your dormant company would officially be dissolved.
The concept of dormant company in Singapore still leaves you with a furrowed brow? Talk to our consultants by dropping a chat message or sending an email via firstname.lastname@example.org.