What Is A Dormant Company and What Are Its Benefits?

The regulatory benefits and identification of a dormant company in Singapore are often confusing. Especially since there are multiple requirements for a company to meet to qualify for dormancy or waiver benefits. Learn more in this article about what a dormant company is and what are the benefits to accounting and filing regulations.

What Is A Dormant Company?

A Dormant Company is a company that has ceased all business operations but can be revived at any time. In Singapore, both the Inland Revenue Authority of Singapore (IRAS) and Accounting & Corporate Regulatory Authority (ACRA) view dormant companies differently. Thus, it is important to understand each definition to avoid errors in accounting for ACRA or taxes for IRAS.

A Dormant Company under Accounting & Corporate Regulatory Authority (ACRA)

ACRA’s definition of a dormant company is based on the Companies Act, which specifies that a firm is dormant if no accounting transactions occur for a period of time.

An accounting transaction refers to any transaction that could raise revenue or bring in expenses. When such a transaction occurs, the company will no longer be considered dormant.

However, some transactions that are to retain compliance with ACRA are exempted. Here are a few examples:

  • Appointing A New Auditor/Company Secretary
  • Up-keeping Your company Registered address, registers, and books
  • Payment of any fee or charge due under any written law (including penalties and interest for late payment).

A Dormant Company under Inland Revenue Authority of Singapore

A company that has no revenue or income during 1 financial basis period (12 months) will be considered dormant even though it might have booked or incurred expenses.

This means that a dormant company may be classified as “Active” for IRAS but might still remain dormant for ACRA.

What are the benefits for dormant companies?

1️⃣ The first benefit to dormant companies in Singapore is that statutory audit requirements do not apply to dormant companies.

2️⃣ A dormant unlisted firm (not a subsidiary of a listed company) is also exempted from the duty to prepare financial statements if the following conditions are met:

  • The dormant company total asset at any time within the previous financial year do not exceed SGD$500,000
  • If the dormant company is a parent company, the consolidated total assets must not exceed SGD$500,000
  • The company has been dormant since incorporation or since the end of the previous financial year
  • The directors of the company have lodged a declaration with ACRA stating the following:
    • The company have been dormant since its incorporation or the end of the previous financial year.
    • In connection to the financial year, no notice has been received under section 201A(3) of the Company Act.
    • The accounting and other records of the company have been maintained in line with section 199 of the Company Act.

💡 Note that you are required to prepare your dormant company’s financial statements if its either a listed company or a subsidiary of a dormant listed company or an unlisted company that does not meet the criteria above.

3️⃣ A dormant company may also apply to file a simplified annual return if the following requirements are met:

  • The company has declared itself as a “private dormant relevant company” in its previous annual return
  • The business does not provide audited financial accounts.
  • ACRA does not require the corporation to submit financial statements.
  • The corporation is not changing any of the data it previously submitted to ACRA.

4️⃣ If the following requirements are met, a director, company secretary, or CorpPass “Approver” may apply for a waiver of the dormant business’s duty to file tax returns:

  • The company has filed its Form C-S/Form C, which contains information on the company’s past activities, such as revenue, gross profit, purchases, directors’ remuneration, and so on, as well as financial statements and tax computations up to the date of business’s termination.
  • It does not own any investments (such as real estate or fixed deposits) or receive any income from them.
  • If it had previously been a GST-registered company, it had been de-registered for GST prior to filing the waiver application.
  • It must not intend to restart operations within the following two years.

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