A dormant company
is a company that has been inactive and has no accounting transactions for the entire financial year
. The company that doesn’t sell or buy anything, pay salaries, employ staff, issue dividends
, and receive returns from investments or any other income is deemed to be a dormant company.
In Singapore, both ACRA
have slightly different criteria to declare a company dormant to provide the relevant exemptions.
Dormant Company as per ACRA
ACRA recognizes a company dormant if there are no accounting transactions for a given financial year, barring some exceptions:
- Appointment of a company secretary or auditor.
- Maintenance of books and registers.
- Maintenance of registered office.
- Payment of composition amount, fees, or fines as per any written law.
- Taking of shares by a subscriber to the constitution in pursuance of an undertaking in the constitution.
- Payments and receipts of a nominal sum not exceeding $5000.
Also, to get the status of a dormant company and be exempted from preparing financial statements and hold AGMs, the company must be:
- Dormant since its formation or the end of the previous financial year.
- Not a listed or a subsidiary of a listed company.
- Not hold assets more than $500,000 including the assets of any subsidiaries, anytime within the previous financial year.
Dormant Company as per IRAS
As per IRAS, a company is given the status of a dormant company if it has not earned any revenue or income during the financial year even though it has incurred some expenses.
A dormant company will have to e-file its Income Tax Returns (Form C-S/C)
every year unless it has been granted an exemption. The exemption can be requested via the Apply for Waiver to Submit Tax Return (Dormant Company)
e-Service. The conditions to get this exemption are:
- Must be dormant and should have submitted the Form C-S/C, financial statements, and tax computations up to the date of cessation of business.
- Must not own any investments and if they do, they should not derive any income from the same.
- Before the application, the company should be de-registered for Goods and Services Tax (GST).
- Must not have any intention of restarting the business within the next two years.
Need for maintaining a Dormant Company
If a company wants to stop its operations, it can either strike it off
or keep it dormant. Keeping it dormant for a given time works out to be cost-effective in case one wants to restart their operations in the future. With a small annual fee, you can retain your brand name, goodwill, patents, licenses, and intellectual property associated with the company.
Recommencement of a Dormant Company
A dormant company can be easily recommenced. Once a company starts earning any income, they need to inform IRAS within one month of the date of commencement of business or receiving the income by writing to firstname.lastname@example.org
to request an Income Tax Return.