IRAS and ACRA Standards for Dormant Companies in Singapore
A dormant company in Singapore is defined as a registered company that is not earning any form of income or is not actively trading now. If you are planning to set up a company that you want to utilize in the future, you aim to set up an SPV, or if you are taking a short break from trading business, then dormant companies could be very advantageous as they have reduced statutory obligations.
IRAS and ACRA Standards for Dormant Companies in Singapore
A dormant company in Singapore is defined as a registered company that is not earning any form of income or is not actively trading now. If you are planning to set up a company that you want to utilize in the future, you aim to set up an SPV, or if you are taking a short break from trading business, then dormant companies could be very advantageous as they have reduced statutory obligations.
A dormant company is basically defined by the lack of business operations or its silence – which means, it is not carrying out any business or trading activities like:
- Hiring Staff
- Buying or Leasing any Property
- Selling or Buying Products and Services
- Issuing Dividends to its Shareholders
- Receiving any Dividend Payments or Managing its Investments
- Paying Accountancy or other Legal Fees from its Business Bank Account
- Paying the Salaries of the Directors
Dormant Companies as per ACRA Standards
A company can be termed as dormant in Singapore only within a period when no business activity is undertaken. But, there are some exceptions for business activities where these activities could relate exclusively to the ‘maintenance’ of how the company is kept in compliance with ACRA and IRAS guidelines like paying the fees of its company secretary. Below are the list of transactions which do not have any effect on the dormant condition of any company in Singapore:
- Auditor’s Approval
- Hiring of a Company Secretary
- Bookkeeping and Maintenance of Registers
- The Maintenance of a Registered Office in Singapore
- Registrar Fees Payment, or Payment of any fine/penalty to the ACRA Registrar
IRAS defines a company as dormant in Singapore in case they do not generate any income or revenue for a specified period of time although they might have incurred or booked some expenses.
Creating a Dormant Company in Singapore
If you have decided to form a dormant company, then you must incorporate it regularly, considering it as a normal LLC or limited liability company. This means that your company would only be labelled dormant as the entity does on perform any business as described above in a specified financial period.
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Lesser Filing Obligations for a Dormant Company
Filing the Annual Return with ACRA
A dormant company in Singapore gets an exemption from filing annual returns and doesn’t have to prepare any type of financial statements, if:
- It is in compliance with substantial assets test (not exceeding the limit of $500,000)
- The company is defined as dormant during the end of the previous financial year or since the beginning or its formation. Then this company is exempted from the process of audits but it should prepare and put together their financial statements in case they do not satisfy the substantial asset test
Filling the Tax Return with ACRA
After you have established that your company is a dormant company, then you could apply to IRAS and seek permission to be released from the requirement to file an annual tax return (Form C or Form C-S). To qualify to get this waiver, you should be meeting the following requirements:
- Your company should not be owning any investments (such as shares, properties, and so on). In case your company does hold any of these type of investments, then you should not be using it to earn any income or revenue for the company
- You plan that you will not be doing any type of business transactions for the coming two years
- You should have filed all your financial statements along with the tax computations till the time when the company stopped trading
- You should have de-registered for purposes of Goods and Services Tax (GST) (in case you were registered previously)
Recommencing the Business
In a situation where a dormant company is re-commencing its business or it begins to earn any income, then you must notify IRAS within a month starting from the date of earning the income. You need to email at [email protected] for requesting to file your Income Tax Return. AS per the IRAS guidelines, it’s recommended that your email should the following details:
- Subject header: “Recommencement of business and request for Income Tax Return”
- Your company’s name and Unique Entity Number (UEN)
- The date you re-commended your business and new principal activity (in case applicable); and
- Date of receiving or earning any other source(s) of income, for example, interest, dividend, rent, etc. (if applicable)
If you have any queries on how to register a company in Singapore or about Singapore company incorporation, do get in touch with us and we will be able to assist you. If you require more information regarding your specific situation or want guidance about dormant companies, please contact us and our experts would help you.
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