If your company has stopped all its business activities, it will be deemed as Dormant. We explain the requirements, the process, and how to file annual returns for a Dormant company.
Why would I keep a company Dormant if I can close it?
If you want to close down your Singapore business, you can have it striken off. It might be a good solution if you do not have any further plans for the company and want to stop incurring costs maintaining it.
However, if you do not rule out that you might use this company again, consider keeping it Dormant. You will have to pay a small yearly retainer to keep it, and follow a procedure to claim the status. It makes sense if you have a brand name, licenses or patents related to it. You can also use it to strategically hold investments in Singapore, however, you may not derive income from them.
What does a Dormant company mean?
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. In Singapore, both ACRA (Accounting and Corporate Regulatory Authority) and IRAS (Inland Revenue Authority of Singapore) are involved with the Dormant status and each has its own definition. You need to meet ACRA requirements so you are exempted from preparing financial statements for them. And you need IRAS to release you from filing tax returns. Your company may be considered Dormant by one of them and not by the other.
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 expenses does not affect your Dormant status.
How do I 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 is not a listed company or a subsidiary of a listed company
- Your company complies with substantial assets test: it has no more than S$500,000 in assets regardless of standalone or consolidated basis
- Your company has been Dormant since the formation of the end of its previous financial year.
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:
- All financial statements and taxes for when the company was active have been filed
- The company owns no investments, and if it does, they generate no revenue or income;
- You intend to carry out no business transactions for the next two years
- You have de-registered for Goods and Services Tax (if applicable)
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. To do so a company officer sends an email to email@example.com and requests for an Income Tax Return. 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)
How much does it cost to maintain a Dormant company?
To complete annual filings you need Company Secretary and Accountant services. However, as there are fewer procedures involved, the annual retainer is much lower. At Osome, we offer Sleeping Beauty packages that include Secretary, Accounting, and all associated fees, for S$590. The minimum to maintain an operational company with similar services is S$900.
This article was written by experts at Osome – online service for Incorporation, Secretary, and Accounting in Singapore. We help entrepreneurs start and run business, as well as convert it to Dormant and strike it off. We respond fast 24/7 in a secure chat. Learn more and get a free consultation on osome.com