In Singapore, a registered company is dormant if it does not receive any income and has ceased all business activities. Here, we explain everything you need to know about Dormant Companies in Singapore.
Why should you Keep Your Company Dormant?
As you won’t pay the maintenance costs, it might be a good idea to completely close down your business if you have no plans for it. However, if you might run your company again or simply taking a break from trading activities, then you should consider keeping it dormant. Dormant companies have reduced statutory obligations and pay only a small retainer to keep it.
What is a Dormant Company?
Dormant companies carry out no business activities such as:
- Buying and selling of goods and services
- Employing staff
- Issuing dividends
- Receiving dividends payment
- Paying salaries of directors and various others.
The two regulatory bodies that determine the dormancy status of a business are ACRA (Accounting and Corporate Regulatory Authority) and IRAS (Inland Revenue Authority of Singapore). Each organization has a separate view of dormant companies.
Dormant Companies by ACRA Standards
A business is considered dormant by ACRA if it does not perform business transactions. Hence, ACRA does not require dormant companies to prepare financial statements or hold physical Annual General Meetings (AGM). However, dormant companies are allowed to carry out maintenance activities such as:
- Appointing a company secretary
- Maintaining a registered office
- Keeping books and registers
- Paying fees, fines or penalties to ACRA
Dormant Companies by IRAS Standards
IRAS considers a company as dormant if they do not generate any income or revenue in a given period. Hence, a dormant company is exempt from filing tax returns. However, such a business can incur expenses.
Applying for Dormant Status
If you intend creating a dormant company in Singapore, you need to prepare your annual filings and comply with the requirements of both ACRA and IRAS.
ACRA Requirements for Dormant Companies
ACRA exempts your dormant company from preparing financial statements if it meets the following;
- Complies with substantial assets test. That is, it has not more than S$500,000 in assets.
- Dormant since its formation or at the end of the previous financial year.
- Is not listed or a subsidiary of a listed company
IRAS Requirements for Dormant Companies
You can apply to IRAS to release you from your obligation to file tax returns (Form C or Form C-S). To be eligible, you have to meet specific requirements.
- Your company must not be an owner of any investments. If it does, it must not generate any income or revenue.
- You plan not to commence business transactions for the next two years.
- You have de-registered for Goods and Services Tax (GST) if you previously registered.
- You have filed all financial statements and taxes for the entire period your company was active.
Commencing Business Activities with your Dormant Company
Although you can start business transactions anytime, you have to inform the IRAS within one month of receiving income. A company officer can send an email to ctmail@iras.gov.sg to ask for an Income Tax Return. The email should contain:
- 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 sources of income, e.g. dividend, interest, rent, etc. (if applicable)
Cost of Maintaining a Dormant Company
It costs less to run a dormant company than an operational one. The low price is because you won’t need to make annual filings, which requires an accountant and a company secretary. For S$500, we’ll provide everything you need to maintain your company.
Next Steps
If you need more information about dormant companies, want to apply for dormant status or close your company, then talk to our experts. We are ready to help.