We will share everything you need to know about dormant companies in Singapore in this guide.
Dormant companies are the subject of some misconceptions and confusion. Hopefully, this guide will help you understand dormant companies better.
Before we dive into all that, let’s first get the basics straight. What is a dormant company under Singapore law? How does one apply for dormancy status? What are the benefits of company dormancy?
What is a Dormant Company?
Dormant companies are basically Singapore-registered corporations that don’t trade or generate income in any way. They shouldn’t engage in activities such as:
- Investing in subsidiaries.
- Managing investments.
- Buying or leasing property.
- Selling and buying goods and services.
- Employing workers.
- Receiving dividend payments.
- Paying directors’ salaries.
- Issuing dividends to shareholders.
- Paying or receiving funds exceeding the nominal sum of S$5,000.
- Accounting transactions.
Singaporean dormant companies should not conduct any business-related activities. Meanwhile, it gets to enjoy reduced statutory obligations, among other benefits.
Dormant companies in Singapore are regulated by the Accounting and Corporate Regulatory Authority (ACRA) and the Inland Revenue Authority of Singapore (IRAS). It just so happens, however, that they define dormant companies differently.
ACRA’s Definition of a Dormant Company
Singapore’s Companies Act identifies dormant companies as registered corporations that are inactive for a specific period of time without performing any accounting transactions.
In this case, accounting transactions refer to those activities that affect your company’s financial statement. Other than that, you can think of them as dealings that can potentially bring in revenue or create expenses for your company.
They include:
- Taking out a loan from a lender.
- Dividend payments to shareholders.
- The sale of assets (such as machinery and real estate property) to third parties.
- Buying assets from suppliers.
- Providing customers with goods or services.
The ACRA doesn’t expect your company to handle funds during its dormancy period. You risk losing the status of a dormant company if you don’t.
Don’t get us wrong. ACRA doesn’t completely restrict your company’s access to corporate transactions. At least you can:
- Pay fees, including penalties and interests.
- Keep business registers and books.
- Maintain the registered office of your company.
- Appoint an auditor for the company.
- Nominate a company secretary.
- Offer company shares to a subscriber who’s listed in the constitution.
In other words, you’ll be able to manage your company even when it’s dormant.
IRAS’s Definition of a Dormant Company
On the other hand, the IRAS defines a dormant company as one that has not conducted any business, or received any income for a period exceeding 12 months.
If you wish to declare your company dormant in Year of Assessment (YA) 2021, for example, IRAS will review the company’s income stream throughout 2020.
But, get this – while ACRA prohibits dormant companies from incurring expenses, the IRAS contrastingly allows you to process your company’s expense payments. As long as your company hasn’t generated revenue, you qualify for dormancy status even when you’ve paid a string of bills.
How to set up a dormant company in Singapore
Fortunately, you’re not required to fill out special applications to have your company declared dormant. The IRAS and ACRA just need to be notified through your company’s annual tax filings.
They’ll then review your company’s parameters based on their respective requirements for dormant companies. In the end, only companies that meet both ACRA’s and IRAS’s conditions are granted dormancy status.
How to File Taxes of a Dormant Company
Filing annual returns with ACRA
In the case of a dormant company that is publicly listed, ACRA will require you to file its annual returns within five months of the end of its financial year. Dormant unlisted companies have seven months after the end of their financial year to reopen.
Company secretaries, directors, or registered filing agents should handle the actual filing process. Just fill out an annual return form with all the company details – including the names of the officers, share details, registered address, etc. This should be accompanied by financial statements that demonstrate the company has not traded throughout the year.
Filing Income Tax Return Form with IRAS
Once you have filed your annual returns with ACRA, the IRAS still requires you to submit your income tax return form by the 30th of November for paper filing, or by the 15th of December for e-filing. All dormant companies in Singapore must file an income tax return unless they’ve successfully applied for a waiver.
Without the waiver – which is normally granted by IRAS – you are free to e-file the company’s tax returns through Singapore’s MyTax portal.
In order to proceed, you need to be authorized as an “Approver” for “Corporate Tax” in CorpPass. Additionally, you will need your CorpPass ID, CorpPass password, and the company’s tax reference number.
Here’s the entire procedure in detail:
Access myTax portal via mytax.iras.gov.sg
Log in to the account using your CorpPass ID, CorpPass passwords, and the company’s tax reference number, located under “Business Tax Matters”.
From the dashboard, click on “Corporate Tax” along the main menu, and then click “File Form C-S/C”.
Next, you’ll need to specify the “Year of Assessment” for your dormant company tax filing, along with either Form C-S or Form C.
You can now proceed to fill out the form with your company information, before moving on to the confirmation page, where you will need to confirm everything.
Once all the details are correct, you can hit “Submit” to forward the form to IRAS. An acknowledgment page will appear immediately, which you may save and print for your records.
And that’s all it takes to file the income tax returns of a dormant company in Singapore.
Resuming Business – no longer dormant
At any time, you may resume business.
When your company receives income or resumes business activities, it is no longer dormant. As soon as you resume business or earn income, you must notify IRAS.
Please contact IRAS via email at ctmail@iras.gov.sg and request for a tax return with the following information. You may indicate “N/A” if not applicable.
- 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 in dd/mm/yyyy format
- Date of receipt of other source(s) of income (e.g. interest, dividend, rent, etc.) in dd/mm/yyyy format
- New principal activity and the effective date of change in dd/mm/yyyy format together with a copy of BizFile extracted from ACRA showing the principal activity of the company
Closing and Striking off a Dormant Company
If you choose to do so, you may also strike off your dormant company at any time.
However, you must first ensure that the criteria of striking off a company must first be met.
There are a number of advantages of having a dormant status, including protection of your brand name, preparing a restructure, owning intellectual property, and dealing with demised/owners with ill health.
To find out more about dormant companies and how you can change your company status, simply contact us now for expert advice.
We can help you. Additionally, we offer free consultations.