Dormant Companies and Their Filing Obligations in Singapore

 Dormant Companies and Their Filing Obligations in Singapore

A dormant company in Singapore is a company that is not actively engaging in any business activities. Whether it’s taking a break from trading or simply waiting for the right time to restart operations, understanding the legal obligations of a dormant company is crucial. Both the Accounting and Corporate Regulatory Authority (ACRA) and the Inland Revenue Authority of Singapore (IRAS) have distinct definitions and filing requirements for dormant companies. 

In this article, we will explore what defines a dormant company under both ACRA and IRAS, along with their filing obligations.

What is a Dormant Company?

A dormant company is essentially one that does not engage in any income-generating activity. This could mean no buying or selling of goods, no issuing dividends, and no other transactions that affect its financial position.

For business owners, keeping a company dormant can be a temporary strategy, especially if they plan to resume operations in the future. However, despite being inactive, a dormant company is still required to meet certain legal obligations in Singapore.

ACRA's Definition of a Dormant Company

ACRA defines a dormant company based on the Companies Act (CA). According to ACRA, a company is dormant if there are no accounting transactions that affect its financial statements. These transactions could include:

- Selling goods or services

- Purchasing or selling assets

- Borrowing funds

- Paying dividends to shareholders

However, certain activities do not affect a company's dormant status under ACRA. These include:

- Issuing shares to subscribers

- Appointing a company secretary or auditor

- Maintaining a registered office

- Keeping financial books and registers

If none of these transactions have taken place, the company remains classified as dormant under ACRA.

 IRAS' Definition of a Dormant Company

IRAS, on the other hand, defines a dormant company as one that has not conducted any business or received any income for a continuous period of 12 months. For example, a company that did not trade or earn income in 2022 would be considered dormant for the Year of Assessment (YA) 2023.

It is important to note that these differing definitions from ACRA and IRAS may affect the company’s obligations when it comes to annual filings and taxes.

Filing Obligations for Dormant Companies

Even though a company may be dormant, it is not exempt from certain filing obligations. These obligations vary depending on whether they are related to ACRA or IRAS.

 ACRA Filing Obligations

1. Exemption from Statutory Audit: 

   Dormant companies are exempt from statutory audit requirements, meaning they do not need to have their financial statements audited.

2. Exemption from Preparing Financial Statements: 

   Dormant companies that meet certain conditions are also exempt from preparing financial statements. The conditions include:

   - The company is unlisted and not a subsidiary of a listed company.

   - The company’s total assets (or consolidated group assets for parent companies) do not exceed S$500,000.

   - The directors have lodged a declaration of dormancy with ACRA.

3. Annual Return Filing: 

   All dormant companies must file annual returns with ACRA. Dormant companies may qualify to file simplified annual returns through BizFile+, where most information is pre-filled. To qualify, the company must:

   - Be classified as a “private dormant relevant company”

   - Not prepare audited financial statements

   - Have no changes in previously filed information

IRAS Filing Obligations

1. Filing Corporate Tax Returns: 

   Dormant companies are required to e-File their corporate tax returns (Form C-S/C) via the myTax Portal unless a waiver has been granted. A company may apply for a waiver of its tax return filing obligations if:

   - It has filed all past tax returns up to the date it became dormant.

   - It holds no investments or income-generating assets.

   - It has cancelled its GST registration (if previously registered).

   - It does not intend to recommence business in the next two years.

2. Waiver of Tax Filing: 

   A waiver can be applied for via the myTax Portal. Once approved, the company will no longer need to submit tax returns unless it resumes business activities.

Recommencing Business for Dormant Companies

If a dormant company decides to resume business, it must notify IRAS within one month of the recommencement. This notification should include:

- The company’s name and Unique Entity Number (UEN)

- The date business activities recommenced

- Any new income sources (e.g., interest, dividends)

- Changes in the company’s principal activity

Once business operations resume, the company will be required to file tax returns for the period it became active again.

Closing a Dormant Company

If you decide to close your dormant company, there are two options available:

1. Winding Up: A formal process that involves appointing a liquidator to distribute the company’s assets. This is generally more expensive but necessary if the company is insolvent.

2. Striking Off: A simpler and less expensive option if the company has no outstanding liabilities, legal issues, or debts. To qualify for striking off, the company must ensure that all tax matters with IRAS have been settled and that there are no ongoing legal proceedings.

Conclusion

While a dormant company in Singapore may not be actively trading, it still has legal and tax obligations that must be met. Understanding the different definitions and requirements set by ACRA and IRAS is key to staying compliant. Whether you’re keeping your company dormant for future business or looking to close it down, make sure to stay informed and consult with professionals when necessary.

If you require assistance with incorporating, maintaining, or closing a dormant company in Singapore, feel free to contact our corporate services team for expert guidance.

Here are some relevant keywords for tagging the blog on Dormant Companies and their Filing Obligations in Singapore:

#delom #Dormant company Singapore #ACRA dormant company #IRAS dormant company #Filing obligations Singapore #Annual return for dormant company #Corporate tax for dormant company #Waiver of tax filing #Dormant company requirements #Dormant company tax return #Strike off dormant company Singapore #Winding up dormant company #Dormant company compliance #BizFile dormant company #Singapore business regulations #Dormant company financial statements