Dormant companies in Singapore (IRAS and ACRA standards)

4 minute read

A dormant company in Singapore is a registered company that is not receiving any form of income or is actively trading. Whether you’re interested in setting up a company you intend to use in the future, you’re taking a break from trading, or you intend to set up a SPV, dormant companies can be beneficial because of their reduced statutory obligations.

A dormant company is typically defined by its silence or lack of business activity – that is, it does not carry out any trading activities such as:

• Any accounting transactions
• Payment or receipt exceeding the nominal sum of S$5,000
• Employing staff
• Selling and buying goods and services
• Buying or leasing property
• Issuing dividends to shareholders
• Paying directors’ salaries
• Receiving dividend payments or managing investments
• Investments in subsidiaries

ACRA and IRAS views differ a little when it comes to dormant companies in Singapore. Here’s the quick rundown of the difference between how the two organisations view dormant companies.

Overview:

• Dormant companies (ACRA standards)
• Dormant companies (IRAS standard)
• Creating a dormant company in Singapore
• Reduced filing requirements for a dormant company
• Recommencing business

Dormant companies (ACRA standards)

A company can be called dormant in Singapore only during a period where no business activity occurs. However, there are certain exceptions for activities where these activities relate solely to the ‘maintenance’ of keeping the company compliant with ACRA and IRAS (such as paying the fees of a company secretary). Here’s the list of transactions that will not affect the dormant state of any company in Singapore:

• The appointment of Secretary
• The appointment of Auditors
• The maintenance of a registered office
• The keeping of registers and books
• The payment of any fee or charge (including penalty, interest for late payment) payable under any written law
• The payment of any composition amount
• The payment or receipt of such nominal sum not exceeding S$5,000

Dormant companies (IRAS standards)

IRAS identifies a company as dormant in Singapore when they do not have any income or revenue for a given period of time even though they may have been booked or incurred expenses.

For example, if a company has not conducted any business and has received no income in 2022, IRAS will identify it as a dormant company in Year of Assessment (YA) 2023.

Creating a dormant company in Singapore

When you intend to incorporate a ‘dormant company’, you incorporate it regularly, as if it were a normal limited liability company. In essence, this means that a company is only labelled dormant after the entity has, over a given financial period, does on carry on business as described above.

Reduced filing requirements for a dormant company

Filling your annual return with ACRA
A dormant company in Singapore may be exempted from preparing its financial statements under Section 201A of the Companies Act, if:

However, please note that a dormant company exempted from preparing its financial statements should still prepare a set of management accounts for approval at the company’s AGM.

Filling your tax return with IRAS
Once you have determined that you are a dormant company, you can apply to IRAS to be released from your obligation to file a tax return (Form C or Form C-S). In order to qualify for this waiver, you need to meet the following requirements:

• Your company must not own any investments (e.g., properties, shares and so on). If you do hold this kind of investments, you must not use it to generate any revenue or income for the company.
• You intend that you will not commence any sort of business transactions for the next two years.
• You must have filed all financial statements and tax computations up until the company ceased trading.
• You must have de-registered for Goods and Services Tax (GST) purposes (if you were previously registered).

Recommencing business

Once a dormant company re-commences business or starts to receive any income, you need to notify IRAS within one month from the date the income was earned/received by emailing [email protected] to request for an Income Tax Return. IRAS has recommended that the email have the following details:

• 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); and
• Date of receipt of other source(s) of income e.g. interest, dividend, rent, etc. (if applicable).

Wrap up

In conclusion, a dormant company in Singapore can be a useful option for those who are not actively trading or intend to use a company in the future. It offers reduced statutory obligations and can be exempted from certain filing requirements. 

However, it is important to note that the definitions of a dormant company differ between ACRA and IRAS, and meeting the criteria for both organisations is essential. It is also important to remember that if a dormant company starts to receive any form of income, it needs to notify IRAS within one month and will no longer be considered dormant. 

Ultimately, if you are considering creating a dormant company in Singapore, it is advisable to seek professional advice to ensure that all legal requirements are met.