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Dormant Companies – Everything You Need to Know

Updated: Sep 16, 2022


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We did our best to maintain our resources up to date, with the latest, accurate, and relevant information. If you find any information as misleading, or erroneous, please email to info@sgcwbusinesssolutions.com – thank you for your notification!



Everything you need to know about dormant companies in Singapore will be shared in this guide. We hope that the following guides would help to build a better understanding on the ins and outs of a dormant company.



What is a Dormant Company?


Dormant company refers to a company that does not have any business activities or transactions during its financial period.


The mentioned business activities or transactions include, but are not limited to the following:

  • Purchase of goods or services

  • Sale of goods or services

  • Staff employment and paying of salaries

  • Buying, selling, or leasing of properties


Important: IRAS and ACRA define dormant companies differently.


The compliance requirements for dormant companies are different from active companies, hence it is important to understand how ACRA and IRAS identify a dormant company.


Table below indicated the dormancy definition highlighted by IRAS and ACRA:

IRAS

ACRA

Dormancy Definition

Have no income, regardless or not expenses are incurred.

Must not have any income and expenses, except for statutory expenses (company secretary, accounting fees etc).


Why do Dormant Companies Exist?


It is common that business owners decide to strike off the company when business activities are ceased. However, some business owners may have the following considerations and are decided to keep the company as dormant without striking off.


To maintain or protect the brand name, license, or patent

The effort and money invested for the built reputation would be wasted if it is struck off rather than keeping it dormant.


Taking a break or temporary halt

In some circumstances, where business owners decided to halt the trading activities temporarily for whatsoever reasons, companies may become dormant rather than striking off the company entirely.


It is convenient for dormant company to switch the status to live again whenever they want and resume the business activities.



Should I strike off my Dormant Company?


It would be a good idea to strike off the company when there is no intention to continue the business and the business owners are thinking to cut off the operating cost incurred for running the business.


Otherwise, changing the company’s status to dormant may be considered. It helps business owners to use the same entity to commence their business again when there is a new plan. One of the benefits of converting the company to dormant is that the annual compliance requirement of the company would keep at a minimal. Do note that the annual requirements of a dormant company are different from a live one.



ACRA Annual Requirements for Dormant Company


Dormant companies are required to comply with the two main government agencies in Singapore, namely ACRA and IRAS. It is important to keep in mind that the definition of dormancy is defined by ACRA and IRAS differently.


Company Secretary

As a dormant company, it is not an exemption from appointing a company secretary. Therefore, hiring a company secretary is necessary and the fees are relatively lower than active company. You may check out our package fees for dormant company here.


Filing of Annual Returns

A dormant company will still be required to file the Annual Returns within seven (7) months after Financial Year End (FYE) (applicable for private companies). To find out more on the timeline of Annual Returns, you may click here.


Audit Exemption

Generally, dormant companies are exempted for audit.


Exemption - Preparation of Financial Statements

The exemption could be applied if the private dormant company meets the following:

  • The company’s total assets must not exceed $500,000.

  • Either the company has been dormant since incorporation, or since the start of its financial year (FY). Meaning the company is not becoming dormant during its FY period.

  • The company has declared as dormant by the Director(s) to ACRA.



IRAS Annual Requirements for Dormant Company


Just because the company is dormant does not mean it is exempted from tax filing. All dormant companies are still required to perform tax computation and file the company's Form C-S/C, even the company has no income/sales.


But the good news is – dormant companies are allowed to apply for the waiver to file its income tax to IRAS and will be subjected to IRAS’s approval.


Waiver Application for Income Tax Filing

In prior of the application, the following criteria are to be met:

  • The company does not have any intention to recommence business in the next two (2) years.

  • The company does not have any investment. Or else, the company must not attain revenue or income from the investment.

  • The company has filed and resolved all its financial statements and taxes for the time the company is active.

  • The company must deregister as an GST registered company (applicable to GST-registered companies).


The waiver could be applied online using CorpPass. Generally, the processing time may take up to two (2) months or more if the situation is complicated. Upon approval, the Form C-S/C will not be issued to the applicant.



Summary of Annual Compliance for Dormant Companies

ACRA

IRAS

  • Annual Returns must be filed within 7 months after Financial Year End (applicable to private limited companies).

  • A company secretary must be appointed.

  • If total assets are less than S$500,000; no need to hold AGMs and prepare financial statements. Otherwise, compliance requirements as per normal.

  • Estimated Chargeable Income (ECI) and Form C-S/C must be filed for each Year of Assessment (YA). These filings will be exempted if a waiver to file income tax is applied and approved.


Resuming Business and no longer dormant


Once your dormant company recommences business or receives income, it is no longer dormant and are required to notify IRAS on the resumption of business within one (1) month from the date of commencement of business.


A notification email must be sent to IRAS at ctmail@iras.gov.sg to request for an Income Tax Return with the following details, an N/A may be indicated if it is 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.

  • Date of receipt of other sources of income e.g. interest, dividend, rent, etc (if applicable).

  • New principal activity and the effective date of change together with a copy of BizFile extracted from ACRA showing the principal activity of the company (if applicable).



Closing a Dormant Company


To close your dormant company, you may either:

  • Wind up the company; or

  • Striking off its name in the register of companies.


Generally, it is more costly to wind up a company than striking off a company. But winding up is the only option if the company is insolvent, the higher costs are attributed to the remuneration of liquidator.


If the company is solvent and the director decides to strike off the company, the following matters shall be resolved with IRAS before an application for striking off is submitted to ACRA:

  • Corporate income tax returns are filed up to the date on which it ceased trading.

  • The GST registration must be cancelled and all outstanding GST matters have been resolved.

  • Outstanding matters related to tax must be resolved with IRAS, for examples the queries raised by IRAS, tax assessments and outstanding tax payment.


In additional, the following requirements must first be met before submitting the strike off application to ACRA via BizFile+:

  • 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.


Lastly - No fee will be charged by ACRA for the striking off application, and the whole process will take at least four (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 us.

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