Putting a company into dormancy in Singapore is often confused with the closing down of a company. A dormant company is a company that is not having any trading activities but have plans to recommence the business. If you are in this case, you can consider putting the company into dormancy, instead of closing it down, to reduce statutory obligations and costs.
Business owners must be aware that the definition of ‘Dormant Company’ differs between Inland Revenue Authority of Singapore (IRAS) and the Accounting and Corporate Regulatory Authority of Singapore (ACRA). It is important to note the difference since it will determine the company’s obligation towards the two different authorities.
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ACRA’s definition of a dormant company
A company is considered as dormant if there is no business activity. Activities such as the appointment of company secretary and auditor, maintaining registers and registered address and payment of penalties and fines, carried out in the year for the purpose of keeping the company compliant with the authorities, will not affect the dormant status.
IRAS’ definition of a dormant company
A company is considered as dormant if it has not generated any revenue for the whole of the basis period even though expenses may be incurred.
How to apply for the dormant status of the company
A company must fulfil the above criteria of being a dormant company over a given financial period or year of assessment before it can be notified to the authorities and file the necessary Annual Return and Tax Return for dormant company.
A company will cease dormancy status with ACRA for the financial period as soon as there is business activity in the year. Whereas it will cease dormancy status with IRAS if any revenue is generated for the basis period.
Implication of a dormant status
Although there will still be an annual maintenance fee for your corporate service provider to maintain the company statutorily, the dormant status of a company will reduce statutory obligations and costs.
1. Filing of Annual Return with ACRA
For a live company, financial statements must be prepared and filed with the Annual Returns. However, for dormant company, it can be exempted from the requirement to prepare the financial statements if it is non-listed, fulfils the substantial assets test whereby the total assets of the company at any time in the financial year (whether separate or consolidated) must not exceed SGD 500,000, and the company has been dormant from the time of formation or since the end of the previous financial year.
2. Filing of Tax return with IRAS
A dormant company must still file its Corporate Income Tax Return (Form C-S/ Form C-S (Lite)/ Form C) by 30 November every year unless the company has been granted a waiver to file Form C-S/ Form C-S (Lite)/ Form C. The qualifying conditions to apply for the waiver are as follow:
• All the tax returns have been filed up to the date of cessation of business
• Company must not own any investments, and even if it owns investments, it must not derive any income from these investments
• It must have been de-registered for GST purpose
• It must not have the intention to recommence business within the next 2 years
The reduced statutory obligations therefore reduce compliance costs such as the fee for accounting, preparation of financial statements and tax returns until the business recommence.
A dormant company in Singapore could easily recommence its business anytime by just notifying IRAS by email via myTax Mail in the tax portal, within one month from the date of commencement of business. It is not required to inform ACRA immediately as company can just file the status of the company as ‘Active’ for the financial year during the Annual Return Filing, after the Annual General Meeting.
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