Ever questioned yourself about what a dormant company is?
What are the transactions allowed by ACRA for a dormant company?
Are you still required to file with Accounting and Corporate Regulatory Authority (ACRA) and the Inland Revenue Authority (IRAS) despite your company’s dormant status?
In Singapore, dormant companies are defined according to the regulations imposed by the Company Law as businesses which have not completed any activities from which incomes have been generated during a specific financial period. However, companies are considered dormant under different circumstances according to ACRA and the IRAS.
Dormant Companies according to ACRA and IRAS
The IRAS defines a dormant company as a business that has not generated any income during a specific period of time, typically a financial year. However, it may have incurred expenses.
On the other hand, to be considered a dormant company in Singapore, ACRA defines it to have no accounting transactions. However, according to ACRA, certain activities of a Singapore company are not considered accounting transactions. These include:
- The appointment of an auditor;
- The appointment of a company secretary;
- The maintenance of a legal address;
- The payment of fees and/or penalties applied by ACRA;
- The maintenance and bookkeeping of registries and company books; and
- Transactions related to the taking of shares by a new shareholder or subscriber under certain conditions.
Why You Should Keep Your Company Dormant Rather Than Closing It
If you are a business owner who owns a company in Singapore and you are not actively operating it, you can choose to have it closed down. It might be a good solution if you do not have any further plans for the company and want to stop incurring costs maintaining it.
However, if you look forward to reviving the operations of your company in the future, the best option is to consider keeping it dormant. All you will have to do is to pay a small fee annually in order to keep it, and follow certain procedures to claim the status. It makes sense if you have a brand name, licenses or patents related to it.
Annual Filing Requirements for Singapore Dormant Companies
As stipulated in the Singapore Company Act, all locally registered companies must file their Annual Returns to ACRA within one month of their annual general meeting (AGM). Even dormant companies that have ceased trading have to fulfil these requirements on order to be considered ‘live’. To file annual returns, the dormant company must hold the shareholders’ AGM during which the stockholders must approve the financial documents presented by the management board.
The following are the filing requirements for dormant companies:
Filing Income Tax Return (Form C-S/ C)
Dormant companies in Singapore must file their annual tax returns with the IRAS by preparing Form C-S or Form C. The Singapore company has to follow filing requirements, even when it has no business or income for the basis period under consideration unless it has been granted a waiver for the submission.
To qualify for a waiver to submit an Income Tax Return, the conditions include:
- It must be dormant and has submitted either its Form C-S or Form C, accounts and tax computations up to the date of cessation of business;
- It must not own any investments (e.g. shares, real properties, fixed deposits), or derive any income from them if it owns investments
- It must have been de-registered for Goods and Services Tax (GST)
- It must not have the intention of restarting business within next 2 years
Annual Return Filing Requirements by ACRA
A dormant company is exempted from preparing, auditing and filing of financial statements with ACRA if:
- It is not a listed company or a subsidiary of a listed company;
- It’s dormant since formation or the end of its previous financial year; and
- It fulfils the substantial asset test (total assets at any time during the financial year is equal or less than $500,000).
The dormant listed companies must prepare their financial statements if they do not fulfil the substantial asset test. However, they are exempted from the audit.
How to Resume Operations of a Dormant Company
When your dormant company is ready to commence business again, you should inform IRAS within a month once you start doing business or receiving income. You can do this by completing and submitting ‘Request for Income Tax Return (Form C-S/ C)’ form and ‘Notification of New Financial Year End’ form to IRAS.
You should send an email to [email protected] and requests for an Income Tax Return. Here’s what IRAS asks to include:
- Subject header: “Recommencement of business and request for Income Tax Return”
- Name and Unique Entity Number (UEN) of the company
- 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)
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