Is My Singapore Company Dormant?
Determining whether your Singapore company is considered dormant is crucial for remaining compliant with the requirements of both the Inland Revenue Authority of Singapore (IRAS) and the Accounting and Corporate Regulatory Authority (ACRA).
This comprehensive guide explains the main criteria, filing obligations, and possible exemptions that apply to businesses seeking support in corporate secretarial, business consultancy, and tax advisory matters.
Dormancy for Tax Purposes (IRAS)
For tax purposes, IRAS defines a company as dormant if it has no income and conducts no business activities during the financial year. This includes having no local or overseas income and not earning bank interest or returns from investments.
Tax Advisory Tip: Dormant companies are not allowed to claim capital allowances or deduct expenses while dormant. However, if the shareholding test is met, unutilised losses from prior years can be carried forward.
Dormancy for Annual Return Filing (ACRA)
ACRA recognises two categories of dormant companies:
- Dormant Company: No accounting transactions during the financial year.
A Dormant Company, while possibly exempt from audit, must still prepare financial statements.
- Dormant Relevant Company (DRC): No accounting transactions, is a private limited company (not listed or a subsidiary of a listed company), and has total assets below S$500,000.
A DRC is exempt from preparing financial statements.
Different Definitions, Different Obligations
IRAS and ACRA use different definitions of dormancy, resulting in varying obligations. A company could be considered dormant by ACRA but not by IRAS, particularly if it receives incidental income such as bank interest. This distinction affects filing requirements, and any misalignment may lead to penalties.
Business Consultancy Tip: Understanding these differences is critical for strategic planning, especially if the company is considering restructuring, holding assets, or planning future business reactivation.
Exemptions for Dormant Companies
Dormant companies may be eligible for filing exemptions with both IRAS and ACRA.
- IRAS: Waiver of Tax Filing
- Companies may apply for a waiver if all prior tax returns have been filed, the company does not own income-generating investments, is deregistered for GST if applicable, and does not plan to recommence business within two years.
- Once the waiver is approved, IRAS will stop issuing Form C-S/C. The company must notify IRAS within one month if business activities resume.
- ACRA: Exemption from Financial Statements
- A Dormant Relevant Company (DRC) may be exempt from preparing financial statements if it has no accounting transactions, is a private limited company, and its total assets do not exceed S$500,000.
- Directors must submit a declaration of dormancy with ACRA to claim this exemption.
Whether you are managing a dormant entity or planning to resume operations, our team offers comprehensive corporate secretarial, business consultancy, and tax advisory services tailored to your company’s needs.
- Filing waivers
- Preparing financial statements
- Strategic advice on dormancy implications
Contact us today to ensure your company remains compliant and well-positioned for future growth.
Frequently Asked Questions (FAQ)
- What does it mean for a company to be dormant in Singapore?
A dormant company is one with no business activities or income during a financial year. However, IRAS and ACRA define dormancy differently, impacting tax and annual return filing obligations.
- How does IRAS define a dormant company?
IRAS considers a company dormant if it has no income or business activities, including overseas income and bank interest. Any income disqualifies the company from being dormant for tax purposes.
- Can a dormant company skip filing tax returns?
Yes, if the company meets IRAS’s dormancy criteria, it may apply for a waiver of tax filing. Once approved, tax returns are not required until business activities resume.
- What is a Dormant Relevant Company (DRC) under ACRA?
A DRC is a private limited company that has no accounting transactions during the financial year, is not listed or a subsidiary of a listed company and has total assets below S$500,000. DRCs are exempt from preparing financial statements.
- Can a company be dormant for ACRA but not for IRAS?
Yes. A company may satisfy ACRA’s dormancy conditions but still need to file tax returns with IRAS if it receives incidental income such as bank interest.
- What exemptions are available for dormant companies?
IRAS: Companies may apply for a waiver of tax filing if they meet certain criteria, such as not owning income-generating assets and having no intention to resume business.
ACRA: DRCs may be exempt from preparing financial statements if they meet the necessary dormancy and asset criteria.
- Do dormant companies still need to file annual returns?
Yes. Even if exempt from preparing financial statements, dormant companies are still required to file annual returns and maintain statutory registers.
- Should I consult a professional about dormancy status?
Absolutely. Dormancy status affects compliance, tax planning, and corporate governance. Engaging a corporate secretarial, business consultancy, or tax advisory professional ensures correct classification and helps avoid penalties.