In Singapore, a dormant company is a registered company that has not received any form of income or transactions. Whether you have plans or intentions to set up a company now with the intention of using it in the future; or you want to take a break from your business, a dormant company can be beneficial as a dormant company reduces your statutory obligations.
What is the difference between a dormant company and a closed company?
If you want to close your Singapore company, you can divest it. If you have no further plans for the company and wish to stop incurring the costs of maintaining it, a dormant company may be a good solution.
A dormant company is usually a company that is “dormant” or lacking in business activity, meaning that it does not carry out any trading activities such as
- any transactions
- payments or receipts in excess of S$5000
- Employment of staff
- Selling or purchasing goods and services
- Purchase or lease of property
- Payment of dividends to shareholders
- Paying directors’ salaries
- Receiving dividends or managing investments
- Investing in subsidiaries
However, if you do not rule out the possibility of using the company again, consider keeping it dormant. You will pay a small annual maintenance fee to keep it and follow the government’s procedures for applying to become a dormant company. It makes sense to maintain a dormant company, especially if you have a brand name, licence or patent associated with it. You can also use it to strategically hold your investments in Singapore.
How do ACRA and IRAS define a dormant company differently?
When it comes to dormant companies in Singapore, the Accounting and Corporate Regulatory Authority of Singapore (ACRA) and the Inland Revenue Authority of Singapore (IRAS) have somewhat different definitions. The following are the differences and brief descriptions of the definitions of dormant companies by these two bodies.
Dormant Company (ACRA Standard)
In Singapore, a company can only be called a “dormant company” if it has no business activities for a period of time. However, the following activities do not affect your company’s dormant status if they are carried out to keep your company compliant with ACRA and IRAS requirements (e.g. payment of company secretary’s fees). These include：
- The appointment of the company’s statutory secretary
- The appointment of an auditor
- Maintenance of a company registered address
- Keeping registers and books of account
- Payment of fees or charges payable under any law (including penalties, interest on late payment)
- Payment of any settlement (penalty) amount
Payment or receipt of nominal sums not exceeding S$5,000
Dormant Companies (IRAS Standard)
IRAS recognises a company as dormant in Singapore when it has not generated any income or revenue for a certain period of time, even though it may have booked or incurred expenses. Having statutory expenses does not affect the dormant status of your company.
How do I apply to become a dormant company?
The process of notifying the authorities (ACRA and IRAS) that your company is dormant is essentially the preparation of your company’s annual inspection documents. The most important part is to ensure that your company meets the ACRA and IRAS requirements for dormant status.
Essentially, a dormant company is not registered at the outset, but only after an entity has not carried on a relevant business for a specific financial period.
What are the financial reporting and tax reporting requirements for dormant companies?
1. Submission of annual return to ACRA
Under section 201A of the Companies Act, a dormant company in Singapore is exempted from preparing its financial statements if
- it is not a listed company or a subsidiary of a listed company
- the value of its total assets (whether separate or consolidated) at any time during the relevant financial year does not exceed S$500,000
- your company has been dormant since the end of the previous financial year
ACRA exempts dormant companies from preparing financial statements and holding actual general meetings. However, please note that a dormant company exempted from preparing financial statements should still prepare a set of management accounts for approval at the company’s AGM.
2. Filing a company tax return with IRAS
Once it has been established that your company is a dormant company, you can apply to IRAS for an exemption from the obligation to file a tax return (Form C or C-S). In order to qualify for this exemption, you will need to meet the following requirements:
- Your company must not own any investments (e.g. property, shares, etc.). If you do hold such an investment, you must not use it to generate any income or revenue for the company.
- You intend not to enter into any form of business transaction within the next two years
- You must have submitted all financial statements and tax calculations until the company ceases trading
- You must have deregistered from Goods and Services Tax (GST) (if you have done so previously)
What do I need to do for a dormant company that has newly started its business?
Once the dormant company reopens for business or starts receiving any income, you will need to notify IRAS (ctmail@iras.gov.sg) by email within one month of the date the income was earned/received 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 source(s) of income e.g. interest, dividend, rent, etc. (if applicable)
