What does a Dormant company mean?
A dormant company in Singapore is a registered company that is not receiving any form of income or is actively trading. A company becomes Dormant if there is no business activity connected to it: you don’t sell or buy anything, employ no people, pay no dividends, and receive no income. Whether you’re interested in setting up a company you intend to use in the future, you’re taking a break from trading, or you intend to set up a SPV, dormant companies can be beneficial because of their reduced statutory obligations.
A dormant company is typically defined by its silence or lack of business activity – that is, it does not carry out any trading activities such as:
· Any accounting transactions
· Buying or leasing property
· Payment or receipt exceeding the nominal sum of S$5,000
· Receiving dividend payments or managing investments
· Employing staff
· Issuing dividends to shareholders
· Selling and buying goods and services
· Investments in subsidiaries
· Paying directors’ salaries
ACRA and IRAS views differ a little when it comes to dormant companies in Singapore. Here’s the quick rundown of the difference between how the two organisations view dormant companies.
Dormant company ACRA definition
ACRA exempts Dormant companies from preparing financial statements and holding physical AGMs. It considers a company Dormant if it had no accounting transactions within a given period. ACRA still treats your company as Dormant even if it does the following:
· Appoint a company secretary
· Maintain a registered office, registers, and books
· Pay fines, penalties, or fees to ACRA
Dormant company IRAS definition
IRAS can release Dormant companies from filing tax returns. For them the important part is that the company is not generating income. Having statutory expenses does not affect your Dormant status.
Creating a dormant company in Singapore
When you start to incorporate a ‘dormant company’, you incorporate it regularly, as if it were a normal limited liability company. In essence, this means that a company is only labelled dormant after the entity has, over a given financial period, does on carry on business as described above.
How to apply for Dormant company?
The procedure to notify the Authorities (ACRA & IRAS) about your company’s dormancy status is, in essence, preparing your annual filings accordingly. The most important part is to make sure that you comply with the requirements for Dormant of each authority. When providing this service for a client's Dormant company a good agent both makes sure that all the requirements are fulfilled and takes care of the filings.
Is my Dormant company exempted from financial statements preparation for ACRA?
It is if you fulfill these three requirements:
· Your company has been Dormant since the formation of the end of its previous financial year.
· Your company complies with substantial assets test: it has to hold no more than S$500,000 in assets regardless of standalone or consolidated basis
· Your company is not a listed company or a subsidiary of a listed company
Does a dormant company need to file a tax return with IRAS?
You can apply to IRAS for a waiver that would release you from an obligation to file the tax return (Form C or Form C-S). There are certain requirements to qualify:
· The company owns no investments, and if it does, they generate no revenue or income
· All financial statements and taxes for when the company was active have been filed
· You have de-registered for Goods and Services Tax (if applicable)
· You intend to carry out no business transactions for the next two years
Can I do business with my Dormant company again?
Yes, you can re-commence business anytime you like. The company has to inform IRAS within one month after it started earning income again. Here’s what IRAS asks to include:
· 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)
