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In this guide, we will share everything you need to know about Singapore dormant companies.
There are a couple misconceptions and confusion pertaining to dormant companies. Hopefully, this guide would help you understand the ins and outs of a dormant company.
What is a Dormant Company?
A dormant company is a company that does not have any business transaction or activities during its financial period.
Examples of business activities includes, but are not limited to:
- Sale / Purchase of goods or services
- Employment of staff
- Buying / Selling / Leasing of properties
- Paying of salaries
However – both IRAS and ACRA define dormant companies differently.
How ACRA and IRAS identifies your company is important because dormant companies have different compliance requirement.
|Dormancy Definition||Have no income, regardless or not expenses are incurred.||Must not have any income and expenses, except for statutory expenses (company secretary, accounting fees etc).|
Why do Dormant Companies Exist?
Usually, when a company has ceased its transactions and do not have any business activities – most business owners would choose to strike off the company (closing down the company).
However, some reasons that business owners may consider keeping the company dormant are as follows.
Taking a break or temporary halt
In some cases, companies may have a temporary halt in trading activities. Whether for consolidation, or simply just to take a break. Companies may become dormant, instead of striking off the company in its entirety.
The dormant company, at any time in the future may resume business activities and its dormant status will be changed to live.
Maintain / Protection of brand names, licenses, or patents
Keeping a company dormant helps to ensure that monies and effort spent to build up the reputation of the business, and its intellectual assets may not necessarily go to waste.
Should I strike off my Dormant Company?
If the company’s business activities has ceased, and there is no intention to continue the business anymore – it would be a good idea to strike off the company entirely. This would also help to stop running costs associated with running the business.
On the other hand, you may consider changing its status to dormant. Perhaps you have a plan to continue to use the same entity to commence business again. By converting the company’s status to dormant, you reduce the annual compliance requirement of the company. Since the annual requirements of a dormant company differs from a live one.
ACRA Annual Requirements of a Dormant Company
There are 2 main government bodies that the dormant company must report to. ACRA, and IRAS. Bear in mind that ACRA and IRAS defines a dormant company differently.
Even as a dormant company, the company still must have an appointed qualified company secretary in its records. A dormant company is not exempted from having a company secretary.
Annual Returns Filing
Contrary to popular beliefs, a dormant company must continue to file its annual returns within 7 months (for private companies) from its financial year end.
Exemption from Audits
Compared to a small private company, there are no criteria to be met (except to be dormant) to be exempted from an audit.
In other words, dormant companies are exempted from being audited.
Exemption to Prepare Financial Statements*
*A private dormant company does not need to prepare its financial statement as long as it meets the following criteria.
IRAS Annual Requirements of a Dormant Company
There is also a common misconception that dormant companies do not need to file its taxes. This is a blanket statement that must not be applied to companies just because they have a “dormant” status.
This means, if the dormant company has not been granted the waiver, the dormant company must still file its income tax, even if the company has no income or sales.
Applying for Waiver to file Income Tax
In order to apply for waiver to file income tax with IRAS, the following criteria must be met.
For applications for waiver, It is encouraged for companies to apply online. Please login with CorpPass for the e-application.
IRAS may take up to 2 months to process the waiver e-application, and may be delayed if the application is complicated.
Once the application is approved, the company will not be issued with a Form C-S/ C in future.
Summary of Annual Compliance for Dormant Companies
|• Must file Annual Returns within 7 months from end of FYE (for private limited companies)|
• Must have appointed a Company Secretary
• If total assets are less than SGD $500,000; no need to hold AGMs and prepare financial statement. Otherwise, usual requirement of financial statement and holding of AGM applies.
|• Must continue to its ECI (ECI filing exemption eligibility)|
• Must continue to file its Form C/C-S. Even if no tax is payable, tax submissions must still be filed.
[Note] If a waiver to file income tax is applied and approved - no need to file ECI / Form C/C-S
Resuming Business - no longer dormant
At any time, you may resume business.
When your company receives any income or resume business activities, it is no longer dormant. You must notify IRAS of the resumption of business within from the date of commencement of business or earning / receiving income.
You have to notify IRAS through email at [email protected] and request for an Income Tax Return with the following information. You may indicate “N/A” if not applicable.
Closing and Striking off a Dormant Company
If you choose to do so, you may also strike off your dormant company at any time.
However, you must first ensure that the criteria of striking off a company must first be met.
To learn more about striking off companies, please refer to our guide here.