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Ah, the intriguing world of dormant companies in Singapore! But wait, what even is a dormant company? Are we required to file annual returns for it? What's the proper way to close a dormant company in Singapore? Or should I just leave it be?
As questions swarm your mind, it can feel like a puzzle with frustratingly elusive answers. But in fact... there is no single answer! Every situation is unique, and the specific circumstances will determine the best course of action.
So, let's embark on this journey together and explore the differing ways in which the Accounting and Corporate Regulatory Authority (ACRA) and the Inland Revenue Authority of Singapore (IRAS) define a dormant company and the different legal implications involved.
What is ACRA’s definition of a dormant company in Singapore?
In simple terms, ACRA defines a dormant company in Singapore as one that hasn't engaged in any accounting transactions during a specific financial period.
Nevertheless, even if dormant, your business is permitted to carry out a limited number of transactions regarding compliance and various administrative expenses. This excludes:
- Expenses associated with the appointment of a company secretary or auditor
- Costs to maintain the registered office
- Fines, fees or penalties made to ACRA
- Maintenance costs of business books and registers
If your company is recognised as a dormant company by ACRA, here's some great news for you! You can enjoy the benefit of being exempted from the submission of financial statements.
What is the IRAS’s definition of a dormant company?
On the flip side, IRAS classifies a company as dormant when it ceases to generate any income. In such cases, your company will be exempted from the annual obligation of filing returns.
What are the filing requirements for a dormant company in Singapore?
Filing annual returns with ACRA
Does your business falls under ACRA’s classification of a dormant unlisted company? If so, there are certain considerations to be aware of. While you are exempt from audit requirements, you are still required to prepare financial statements for annual return filing.
However, do take note of the exceptions, where a dormant unlisted company can be exempt from preparing financial statements (but this excludes subsidiaries of listed companies). This is made possible with the following conditions:
- Company must meet the substantial assets test, meaning its total assets or group's (for a parent company) total assets do not exceed $500,000 at any point during the financial year.
- Company has been dormant since its formation or at the end of the previous financial year, then the requirement to prepare financial statements is exempted.
On the other hand, dormant listed companies and their subsidiaries, as well as dormant unlisted companies that do not fulfil the substantial assets test, are required to prepare financial statements for annual return filing. However, they are exempt from the audit requirement.
Filing tax returns with IRAS
As per IRAS guidelines, a company is classified as dormant if it has not conducted any business activities or generated income during a specified period. For instance, if a company did not generate income throughout the entire year of 2019, it would be considered dormant for the Year of Assessment (YA) 2020.
Even though dormant companies are still obliged to file their Income Tax Return, the process is relatively straightforward. They can opt for e-filing through the myTax portal or submit a copy of the Form C-S/C. The exception is if your company managed to obtain a waiver for the submission of Income Tax Return, then you are not required to file one.
How to close a dormant company in Singapore
After encountering countless unforeseen challenges in the market, your company slowly began to experience a steady decline in revenue and profitability. Eventually, the company found itself struggling to sustain its operations, and management made the difficult decision to transition the company into a dormant state.
Now, it’s been a good run and you’re ready to bid farewell to your dear company that you’ve built from the ground up. Want to tie up the loose ends and give it a proper send off? Here's a simple guide to help you dissolve your company!
All you need to do is submit an application to the ACRA to have your company's name struck out from Singapore's register of companies. This application can be done by your company secretary, director, or registered filing agent. Alternatively, you can e-submit it through the Biz File Portal most conveniently.
Once your application is successfully approved, your company would have been officially dissolved. It’s time to let go of old burdens and move forward with your new ventures!
Let Grof guide you on filing annual returns or dissolving your dormant company!
Experience the excellence and reliability of Grof's company secretarial services, designed to meet your needs with speed and efficiency. As a trusted provider, Grof offers a wide range of services at budget-friendly prices. Whether you require assistance with annual return filings or the proper dissolution of a dormant company, we've got you covered. Take the first step towards success by scheduling a free consultation with us today!
