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Understanding Dormant Companies in Singapore: ACRA and IRAS Definitions

  • A dormant company in Singapore is defined differently by the Accounting and Corporate Regulatory Authority (ACRA) and the Inland Revenue Authority of Singapore (IRAS). Understanding these definitions is crucial for businesses seeking to manage compliance effectively. This article explores these definitions and outlines the regulatory obligations, exemptions, and steps for handling dormant company status in Singapore.

    ACRA’s Definition of a Dormant Company

    ACRA considers a company dormant if it has no significant accounting transactions during a financial period. The key points of ACRA’s definition are:
    • No Business Activity: A company is deemed dormant if it has not engaged in any business transactions or generated any income during the financial year.
    • Permissible Activities: Certain administrative activities do not affect the dormant status. These activities include:
    • The appointment of a company secretary.
    • The appointment of an auditor.
    • Maintaining a registered office.
    • Keeping statutory registers and books.
    • Payment of fees to ACRA or IRAS.
    • Payment for penalties, fines, or statutory fees.
    • Payment or receipt of nominal sums not exceeding S$5,000.

    IRAS’s Definition of a Dormant Company

    IRAS’s definition aligns closely with ACRA’s but focuses specifically on the absence of income:
    • No Income Generation: A company is considered dormant by IRAS if it has not received any income during the financial period.
    • Permissible Activities: Similar to ACRA, IRAS allows for certain administrative activities that do not affect the dormant status, including:
    • Payment of company secretary fees.
    • Audit fees.
    • Maintaining a registered office.
    • Payment of statutory fees.

    Regulatory Obligations and Exemptions for Dormant Companies Statutory Audit and Financial Statements Obligations Under ACRA

    Dormant companies are exempt from the statutory audit requirement if they fulfill certain criteria:
    • No significant accounting transactions.
    • Not listed on the Singapore Exchange (SGX).
    • Not a subsidiary of a listed company.
    While these companies may be exempt from preparing audited financial statements, they must still maintain proper records to substantiate their dormant status.

    Filing Annual Returns with ACRA

    Even dormant companies must file annual returns with ACRA. The filing requirements may be simplified, but failure to file can result in penalties and enforcement actions

    Filing Tax Returns with IRAS

    Dormant companies must file income tax returns unless they have applied for and received a waiver from IRAS. The waiver application can be submitted if:
    • The company has not generated any income during the financial year.
    • The company does not expect to generate income in the near future.
    Applying for the waiver can reduce the administrative burden, but the company must resume filing once it becomes active.

    Steps to Notify IRAS When Recommencing Business

    When a dormant company in Singapore decides to recommence business activities, it is essential to notify the Inland Revenue Authority of Singapore (IRAS) promptly. This ensures that the company complies with tax regulations and avoids potential penalties. Here are the detailed steps to notify IRAS when recommencing business:
    • Notify IRAS within one month from the date of recommencement.
    • Provide the date of recommencement of business.
    • Declare receipt of other sources of income, such as interest, dividends, or rent.
    • Update IRAS for any changed of new principal activity with a copy of the updated business profile from ACRA.
    Ensuring timely notification and compliance with these requirements is essential to avoid penalties.

    Closing a Dormant Company

    If a company decides to cease operations permanently, it can apply for voluntary deregistration with ACRA. The process involves:
    • Settling all outstanding liabilities.
    • Closing all bank accounts.
    • Preparing a final set of financial statements.
    • File tax clearance to IRAS.
    • Submitting the deregistration application to ACRA.
    Once ACRA approves the application, the company is officially struck off the register.

    Conclusion

    Understanding the definitions and regulatory requirements for dormant companies in Singapore is vital for maintaining compliance and leveraging potential exemptions. By adhering to ACRA and IRAS guidelines, businesses can manage their dormant status effectively, ensuring minimal administrative burden while remaining compliant with statutory obligations.