Every entrepreneur knows how volatile and unpredictable the business environment is. There’s no way to predict what changes are coming, as well as how they will affect your business operations. Still, the good news is that businesses incorporated in Singapore have the option to transform themselves into dormant companies, which can offer benefits that suit your goals and circumstances. Here’s everything you need to know about dormant companies in Singapore.
What is a Dormant Company?
The regulatory bodies that are most relevant to dormant companies are the Accounting Corporate Regulatory Authority (ACRA) and the Inland Revenue Authority of Singapore (IRAS), with each one having its own definition of what constitutes a dormant company in Singapore.
ACRA
According to ACRA, a dormant company is one that has made no accounting transactions during a financial year, excluding those that are needed to maintain the company. However, inactivity isn’t the only requirement that a company must meet in order to be considered dormant. Here are the other requirements and conditions that need to be met:
- The company must not be listed
- The company’s assets cannot exceed SGD 500,000 at any point in the financial year
- The company cannot be a subsidiary of a listed company
Learn more about subsidiary companies by reading our article Setting up a Subsidiary Company in Singapore.
With that being said, a company will still be considered dormant if any transaction arises from any of the following:
- A subscriber to the company’s constitution avails shares in the company
- A company secretary is appointed
- An auditor is appointed
- Registered office is being maintained
By ACRA’s definition, a company will cease to be dormant for the financial period as soon as it has any form of business activity.
IRAS
According to IRAS, a dormant company is one that does not carry out any form of business and makes no income or revenue—including goods and services tax—for the entirety of the basis period or financial year. For example, a company that doesn’t carry out any business and has made no income for the whole basis period ending in 2023 will be considered a dormant company for the year of assessment 2024.
A company will cease to be dormant as soon as it generates any revenue for the basis period.
Only when these conditions are met can a company file the Annual Return and Tax Return applications for dormant companies and be recognized as a dormant company.
What are the Benefits of Having a Dormant Company?
Here are some advantages that you can expect when maintaining a dormant company in Singapore:
- Dormant companies can help business owners save money that would have otherwise been spent on operational and administrative costs. Dormant companies only have to pay maintenance costs, which can be further reduced should they be eligible for certain waivers.
- Dormant companies offer a much more attractive alternative to fully closing a company, especially as it allows business owners to still own the company’s name, intellectual property, and overall reputation. In this regard, the company will not have lost or wasted any resources or efforts, which would have been the case had the company chosen to wind down instead.
- Dormant companies give business owners the opportunity to resume their operations more easily without having to start from scratch.
What are the Responsibilities of Dormant Companies?
Even when a company is dormant, it still needs to fulfill certain responsibilities to remain in compliance with regulatory bodies. Here are the responsibilities that dormant companies are entitled to uphold.
File Annual Returns with ACRA
A dormant company’s director, company secretary, or registered filing agent needs to submit annual filings to ACRA within seven months from its financial year end in order to maintain its dormant status and remain in compliance with requirements. The annual return contains details on the company, including share details, names of officers, and financial statements.
Alternatively, a dormant company may submit simplified annual returns on ACRA’s BizFile+ portal, which may pre-fill certain fields with the appropriate information, as long as the following requirements are met:
- The company has been declared a private dormant relevant company in the previous annual return
- The company is not preparing any audited financial statements
- The company is not required to file financial statements with ACRA
- The company is not altering any information that has been previously filed with ACRA
Dormant companies that are unlisted need to file their annual returns within 7 months after their financial year ends, while dormant companies that are listed have to file their annual returns within 5 months after their financial year ends.
Wondering what a financial year end is? Read our article What is the Financial Year End to learn everything you need to know!
Filing Tax Returns with IRAS
A dormant company is required to file its corporate tax returns with Form C-S/C for Dormant Company on IRAS’s myTax Portal, which will take around 5 minutes. Once you’ve successfully filed the Form for Dormant Company, an acknowledgment of receipt will be sent to you.
Dormant companies may also apply to waive IRAS’ tax return filing requirement if the following conditions are met:
- The company is dormant
- The company has filed its Form C-S/Form C-S (Lite)/Form C, financial statements, and tax computations up to the date of the cessation of business activities.
- The company does not own any investments, shares, real properties, or fixed deposits. Should the company own investments, then it must not receive any income from them.
- The company must be de-registered for Goods and Services Tax (GST) purposes prior to the waiver application
- The company must not have any intentions to recommence business operations within the next 2 years
Here are the steps to apply for a waiver:
- Submit the Apply for Waiver/File last Form C-S/C (Dormant/Striking Off) form on the myTax portal
- After submitting the form, the dormant company will have 21 days from the date of submission to file its Form C-S/ Form C-S (Lite)/ Form C for advance years of assessment, financial statements, and tax computations on the myTax portal. Failure to submit this on time will result in your waiver application being rejected.
- The processing time of online applications will take around 2 months after the form is submitted, but this may vary depending on the complexity of your case. Once the application is processed, a digital copy of the letter will be made available on the View Notices/Letters - Corporate Tax section of the myTax portal, which you can then print or download.
Applying for a Waiver in Writing
There may be some cases where the company will need to apply for a waiver in writing, such as in the following cases:
- The sole director of the company has deceased
- The sole director of the company is bankrupt
In those cases, the company will need to write to IRAS and submit the following details:
- Company’s name
- Company’s Unique Entity Number (UEN)
- Reasons for requesting the waiver in writing instead of online
- Business cessation date (dd/mm/yyyy) format
- Confirmation that the company has not been carrying on business, does not have trade income, and has not been receiving any income from investments owned by the company since its cessation date
- Confirmation that the company will not recommence business within the next 2 years
- Financial statements and tax computations for the outstanding year of assessment up to the business cessation date (where applicable)
- Name, identification number, and designation of the applicant
Should your application be successful, then it will be processed within 3 months of receiving it.
Company Secretary Nomination
Dormant companies are legally required to have a company secretary within six months of their incorporation or company date. The company secretary ensures that the company remains in compliance with all statutory requirements and that all records are maintained and up-to-date.
Read our article Appointing a Company Secretary in Singapore to learn more about a company secretary’s responsibilities, as well as the appointment process.
How to Revive a Dormant Company
Here’s how a dormant company can reclaim active status and resume business operations:
- The dormant company must notify the IRAS at least a month before the resuming of business operations or the receipt of income. To do this, an email must be sent to ctmail@iras.gov.sg with the following:some text
- Subject: “Recommencement of business request for Income Tax Return”
- Company’s name
- Company’s UEN
- Company’s date of business recommencement
- Any new principle activity (if applicable)
- Any other sources of income and revenue (if applicable)
- The dormant company must also pass the shareholding test and assign an ‘Approver’ to handle corporate tax matters.
- Should the dormant company have made any donations to the Singapore government or any select institutions, then these can be claimed when filing the appropriate digital services.
How to Close a Dormant Company
If there ever comes a time when the business owner believes that shutting down the dormant company is in its best interest, then the dormant company must undergo the striking off process or the winding up process and file an application with ACRA by a company director, a secretary, a qualified filing agent, or through the BizFile portal.
Should the dormant company undergo the striking-off process, then the director needs to ensure that the following have been settled before filing an application:
- The company’s tax returns are submitted and cover up to the date when the company’s trading has ceased
- All tax matters with IRAS have been settled
- GST registration has been canceled and all matters with the GST have been settled
Once everything has been dealt with, the dormant company’s director, secretary, or registered filing agent may then visit ACRA’s BizFile+ online portal and strike off the company, provided that all the following conditions are satisfied:
- The company has not commenced business operations since incorporation or has stopped all trading activities
- The company has no outstanding debts to any government agency
- The company has no outstanding charges in the charge register
- The company is not involved in any legal proceedings within or outside of Singapore
- The company has no ongoing or pending regulatory matters or disciplinary proceedings
- The company has no existing assets or liabilities as of the date of application and will not have any future assets or liabilities
- The company has acquired at least a majority of directors’ approval in submitting the application to have the company stricken off
The striking off process for a dormant company doesn’t involve any payment fees and will take around 4 months to complete.
Learn more about the striking off process for companies with our article Striking Off a Local Company in Singapore: A Comprehensive Guide!
The Takeaway
There are many reasons why a company may decide to become dormant. Not only does it come with significant cost savings and reduced losses, but it can also be a much more appealing alternative to closing down the company. It also provides the company with the opportunity to resume its operations in the future without having to restart the incorporation process.