A dormant company in Singapore refers to a registered company that does not earn any form of income or engage in active trading. If you plan to establish a company now with the intention of using it in the future, or if you want to take a temporary break from your business, or if you're considering setting up a Special Purpose Vehicle (SPV), a dormant company can be beneficial, as it reduces your legal obligations.
Today, let’s discuss "Dormant Companies in Singapore"!
I What is a Dormant Company
A dormant company typically refers to one that is silent or lacks business activity—meaning it does not engage in any trading activities, such as:
1）Any accounting transactions.
2）Payments or receipts of amounts exceeding S$5,000.
3）Hiring employees.
4）Selling and purchasing goods and services.
5）Buying or leasing property.
6）Distributing dividends to shareholders.
7）Paying directors' salaries.
8）Receiving dividends or managing investments.
9）Investing in subsidiaries.
II Definition of Dormant Companies by ACRA and IRAS
When discussing dormant companies in Singapore, the definitions provided by the Accounting and Corporate Regulatory Authority (ACRA) and the Inland Revenue Authority of Singapore (IRAS) differ somewhat. Here’s a brief overview of the distinctions between the definitions from these two agencies.
1 Dormant Company (ACRA Standards)
In Singapore, a company can only be referred to as a "dormant company" if it has not engaged in any business activities during a specified period. However, if your company undertakes the following activities aimed at maintaining compliance with ACRA and IRAS requirements (such as paying for company secretarial services), these activities will not affect the company's dormant status. This includes:
1）Appointment of a company secretary.
2）Appointment of an auditor.
3）Maintaining a registered office address.
4）Keeping registers and books.
5）Paying fees or charges required by any law (including fines and interest on late payments).
6）Paying any settlement (fines) amounts.
7）Paying or receiving nominal amounts not exceeding S$5,000.
2 Dormant Company (IRAS Standards)
A company is considered a dormant company by IRAS if it has no income or profits during a certain period, even if expenses may have been recorded or incurred. Having statutory expenses does not affect the company's dormant status. For example, if a company did not conduct any business or receive any income in 2022, IRAS will identify it as a dormant company in the assessment year of 2023.
III Application for a Dormant Company
When you intend to establish a "dormant company," you need to set it up regularly, just like any ordinary limited liability company. Essentially, this means that the company is only marked as dormant after it has conducted business activities in accordance with the above criteria during a specified financial period.
IV Financial and Tax Filing for Dormant Companies
1 Submit Annual Returns to ACRA
According to Section 201A of the Companies Act, dormant companies in Singapore are exempt from preparing financial statements under the following conditions:
1) It is not a listed company or a subsidiary of a listed company.
2) At any time during the relevant financial year, its total assets (whether consolidated or not) do not exceed S$500,000.
3) Your company has remained dormant since the end of the previous financial year.
2 Declare Corporate Taxes to IRAS
Once you confirm that your company is dormant, you can apply to IRAS for an exemption from the obligation to submit tax returns (Form C or Form C-S). To qualify for this exemption, you need to meet the following requirements:
1）Your company must not hold any investments (such as real estate, stocks, etc.). If you do hold such investments, you must not generate any income from them.
2）You must intend not to commence any type of business transactions within the next two years.
3）You must submit all financial statements and tax computations up to the date of cessation of business activities.
4）You must deregister for Goods and Services Tax (GST) purposes if you were previously registered.
V Resuming Business Operations
Once a dormant company resumes operations or begins to receive any income, you must notify IRAS via email at ctmail@iras.gov.sg within one month from the date you earn or receive income to request the income tax return form.
IRAS recommends that the email should include the following details:
1）Subject line: "Resumption of Business and Request for Income Tax Return Form."
2）Company name and Unique Entity Number (UEN).
3）Date of resuming operations and any new principal activities (if applicable); and the date of receiving other sources of income, such as interest, dividends, rent, etc. (if applicable).
