Any registered business organization that isn’t actively trading or doesn’t have any income is referred to as a dormant company in Singapore. A firm can be deemed dormant if it no longer: sells or purchases anything, employs people, receive income or pay dividends. While the concept of a dormant company in Singapore is not new, the Accounting and Corporate Regulatory Authority (ACRA) and the IRAS (Inland Revenue Authority of Singapore) define a dormant company differently.
ACRA exempts dormant company from preparing financial statements as well as holding physical AGMs. The authority considers a company to be dormant if it had no accounting transactions in a given period of time. However, ACRA offers certain exceptions for activities that are related solely to maintain the company compliant with the authority. ACRA will deem your firm dormant even if it does the following:
- Pays penalties, fines or fees to Accounting and Corporate Regulatory Authority
- Employs a new secretary
- Maintains registers or books
- Initiates payment of any composition amount
- Appoints auditors
The IRAS classifies a company as dormant in Singapore when they do not record any income or revenue for a set period of time even though the company might have been booked or recorded expenses. According to the IRAS, incurring statutory expenses does not affect a company’s dormant status.
All Singapore company incorporations must be in compliance with the ACRA and the IRAS. In order to enjoy the benefits of a dormant company, it is ACRA that should identify a firm as formant. ACRA exempts a dormant company from preparing financial statements, whereas IRAS releases it from the tax filing obligations.
The procedure one must follow to inform the authorities in Singapore (IRAS and ACRA) is very similar to the one you follow while preparing your annual filings. The main part is to ensure that you comply with the requirements set by both the authorities. If you’re planning to incorporate a “dormant” company, then you must incorporate it regularly, as if it were a usual limited liability firm.
In Singapore, a dormant firm will be exempted from preparing its financial statements under Section 201A of the Companies Act, if:
The company does not have accounting transactions
The company isn’t a listed firm or a subsidiary company of a listed organization
The company’s total assets at any time in the financial year does not surpass $500,000 in value or such other amount as may be prescribed in substitution by the Minister.
Please note that a dormant firm that’s exempted from preparing its annual financial statements must still prepare a management accounts to receive approval at the firm’s AGM.
Once deemed dormant, you can apply to the IRAS to be exempted from your obligation to file a tax return. In order to do so, your company must meet the following requirements.
The firm must not own any investments (for instance, shares, properties etc). If you hold investments, you should not use it to generate any income for the firm.
The firm must declare that it will not start any sort of business transactions in the next two years.
The company must have filed all the financial statements and tax computations up until the firm stopped trading.
The firm should have de-registered for Goods and Services Tax (GST).
These processes are easier to implement when you seek professional aid from accounting services in Singapore.
Once a dormant company restarts business activities, you should notify the IRAS within 1 month from the date the income was earned. This can be done by emailing email@example.com and requesting for an Income Tax Return. The IRAS has clarified that the email must have the following details:
Subject heading: “Recommencement of business and request for Income Tax Return”
Name and the Unique Entity Number of the firm
Date of recommencement of business and new principal activity (if applicable).
Date of receipt of other source(s) of income e.g. interest, dividend, rent, etc. (if applicable).
If you have decided to close your current dormant company, then you must submit an application to ACRA affirming your desire to have your company’s name removed from the register of companies. The application has to be filed by your company secretary, the director or your registered filing agent. It can also be e-submitted through Biz File Portal.