Dormant Company

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 and IRAS 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 ctmail@iras.gov.sg to request an Income Tax Return.