Dormant Companies and Their Filing Obligations in Singapore
What is a Dormant Company?
A dormant company is generally one which does not engage in business activity. This may include buying or selling goods, paying dividends, or receiving income.
One may consider leaving their company dormant if, for example, they decide to take a break from trading and resume when ready – since a dormant company holds its status only temporarily.
As a business owner, you should note that the Accounting and Corporate Regulatory Authority (ACRA) and the Inland Revenue Authority of Singapore (IRAS) have different definitions for a dormant company. These distinctions are noteworthy because they affect your company’s obligation to file its annual return with ACRA and its tax return with IRAS.
ACRA’s definition of a dormant company
ACRA’s definition of a dormant company is derived from the Companies Act (CA), which states that a company is dormant during a period in which no accounting transaction occurs.
An accounting transaction is one which affects the financial statements of a company, i.e. transactions which bring in revenue or result in expenses, such as:
- Selling goods to customers
- Purchasing assets from suppliers
- Selling assets (e.g. property, machinery) to a third-party
- Issuing a dividend to shareholders
- Borrowing funds from lenders
A company will cease to be dormant when such transactions takes place.
However, your company will still be defined as a dormant company if a transaction arises from one of the following actions:
- A subscriber to the company’s constitution takes shares in the company
- The appointment of a company secretary
- The appointment of an auditor
- The maintenance of a registered office
- The keeping of books and registers
- The payment of any fee (including any penalty or interest for late payment) payable under any written law.
IRAS’ definition of a dormant company
IRAS defines a dormant company as a company which has not conducted any business and has not received any income over a 12-month period.
For example, if a company has not conducted any business and has received no income in 2019, IRAS will identify it as a dormant company in Year of Assessment (YA) 2020.
Regulatory Obligations and Exemptions for Dormant Companies
Statutory audit and financial statements obligations under ACRA
A dormant company is exempted from statutory audit requirements.
As for the requirement to prepare financial statements, a dormant unlisted company (which is not a subsidiary of a listed company) is exempted from preparing financial statements if the following conditions are satisfied:
- The company fulfils the substantial assets test (see below)
- 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 that the company has been dormant for the relevant period
The substantial assets test is satisfied if the total assets of the company at any time within the previous financial year (or if the company is a parent company, the consolidated total assets of the group) do not exceed S$500,000.
The directors’ declaration of dormancy must state the following:
- The company has been dormant since its incorporation or since the end of the previous financial year
- No notice has been received under section section 201A(3) of the CA in relation to the financial year
- The company’s accounting and other records have been kept in accordance with section 199 of the CA.
Please note that you must still prepare financial statements if your dormant company is:
- A listed company
- A subsidiary of a dormant listed company
- An unlisted company which does not satisfy the substantial assets test
Filing annual returns with ACRA
Dormant companies are required to file annual returns with ACRA. A director, company secretary, or registered filing agent may file the annual return.
The annual return is an electronic form which contains important particulars of the company such as its share details, names of company officers, and financial statements.
Alternatively, a dormant company may file simplified annual returns on the BizFile+ portal, or the ACRA-On-The-Go mobile application. A simplified annual return consists of an annual return form as well but where most information has been pre-filled.
A dormant company may 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 company is not preparing audited financial statements
- The company is not required to file financial statements with ACRA
- The company’s Financial Year End (FYE) falls on, or after, 31 August 2018
- The company is not altering any information previously filed with ACRA.
A “private dormant relevant company” is a dormant company which is not listed and not a subsidiary of a listed company. The assets of such a company also cannot exceed S$500,000.
If your dormant company is unlisted, its annual returns have to be filed within 7 months after its FYE. If your dormant company is listed, its annual returns have to be filed 5 months after its FYE.
Filing Tax Returns with IRAS
Unless your dormant company has been granted a waiver, it must file its corporate tax return in Form C-S/C for Dormant Company via e-Filing or submission of a hard copy of the tax return to IRAS. However, from YA 2020 onwards, all companies will have to e-File their corporate tax returns via the myTax Portal.
You may wish to refer to the IRAS User Guide for Filing Tax Returns for more information on how to e-File income tax for a dormant company using the myTax Portal.
Applying to waive the tax return filing requirement
A director, company secretary, or an “Approver” under CorpPass may apply for a waiver of the dormant company’s obligation to file its tax returns if the following conditions are satisfied:
- The company has submitted its Form C-S/Form C, on the information related to the company’s past activities, such as company revenue, gross profit, purchases, directors’ remuneration and so on, its financial statements and tax computations up to the date of cessation of business
- It does not own any investments (e.g. real properties, fixed deposits) or derive any income from investments it owns
- It has been de-registered for the Goods and Services Tax (GST) prior to the waiver application if it had previously been a GST-registered company
- It must not have the intention to recommence business within the next 2 years.
Such waiver may be applied anytime via myTax Portal, or by submitting a hardcopy form to IRAS.
You will receive the outcome of the application at the company’s registered address within 2 months if submitted online, or within 3 months if you submitted a hardcopy form.
Once your company has been granted a waiver, you will not need to send a yearly waiver application form to IRAS.
IRAS will also not issue either Form C or Form C-S after the waiver has been approved. The waiver will only cease when your company recommences business.
What Steps Do I Need to Take Upon Recommencing Business?
Once your dormant company recommences business, or begins to receive income, you will have to notify IRAS of the resumption of business within 1 month from the date of commencement of business. This is done by emailing IRAS the following details to request an income tax return:
- 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 sources of income e.g. interest, dividend, rent, etc. (if applicable)
Closing a Dormant Company
If you wish to close your dormant company, there are 2 options available:
- Winding up the company; or
- Striking its name off the register of companies.
Winding up is generally the more costly option as you will need to account for the liquidator’s remuneration. However, if your company is insolvent, winding up is the only option.
If you are a director and wish to strike off your company on the other hand, you should ascertain that the following matters have been settled with IRAS before submitting an application for striking off to ACRA:
- The company’s income tax returns are submitted up to the date on which it ceased trading
- All outstanding tax matters have been settled with IRAS (e.g. all queries raised by IRAS have been answered, and all tax assessments are finalised and paid)
- GST registration has been cancelled and there are no outstanding GST matters.
The dormant company’s director, secretary, or registered filing agent may then apply to ACRA via BizFile+ to strike off the company if the following conditions are satisfied:
- Your company has not commenced business since incorporation, or has ceased trading
- Your company has no outstanding debts owed to IRAS or any other government agency
- There are no outstanding charges in the charge register
- The company is not involved in any legal proceedings (within or outside Singapore)
- The company is not subject to any ongoing or pending regulatory action or disciplinary proceedings
- The company has no existing assets and liabilities as at the date of application and no assets and liabilities that may arise in the future
- All or a majority of the director(s) authorise the applicant to submit the application for striking off on behalf of the company.
The striking off application does not require a fee. The process of striking off will take at least 4 months to complete.
If you require assistance with incorporating a dormant company, complying with its regulatory obligations or closing a dormant company, you may wish to get in touch with a professional corporate secretarial firm.
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