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What Is a Dormant Company in Singapore? What Compliance Needs to Be Done for a Dormant Company?

What Is a Dormant Company in Singapore? What Compliance Needs to Be Done for a Dormant Company?

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What is a dormant company in Singapore? what compliance needs to be done for a dormant Company?

The ultimate purpose of establishing a company is to operate its business and generate income. However, there are some companies which become dormant after being set up.

The concept of dormant companies is not new to most company owners in Singapore. To serve as a guide for those who are unfamiliar with the concept and a refresher for those who have prior knowledge about it, this article will explain everything one needs to know about a dormant company.

What Is a Dormant Company?

According to the dictionary, the word “dormant” means something that is sleeping, resting, or inactive. Hence, a dormant company in Singapore is a registered company that is not:

  • Carrying out any business for the entire financial period
    • For example, if a company did not carry out business operations and had no income for the whole basis period ending in 2019, it will be regarded as a dormant company for the year of assessment in 2020.
  • Having any account transactions in a long period
  • Gaining any means of income
  • Selling or purchasing anything
  • Hiring employees
  • Paying salaries
  • Paying dividends

Thus, the basic principle of determining a dormant company is whether the company is active or inactive, has continued or ceased its operations, or has generated any income for a year or not.

What Are the Criteria of Being a Dormant Company?

Dormant comapany - Criteria of being dormant

The following criteria make up a dormant company:

  • There are no sales invoices during the entire period.
  • Total expenses are generally less than S$1,000 in a year-end.
  • The total number of transactions is less than 100 in a year.

These criteria primarily focus on sales invoices, that is whether the company has generated income or not. Second, even if a company is dormant, it will still have some transactions like a bank organization might impose monthly bank charges to keep its account active. Generally, the instance of having some transactions will be there, but there should not be a single sales transaction and other transactions are limited in number and amount.

What Is the Impact of Declaring a Company As Dormant?

Dormant comapany - Impact of Declaring

A company must inform ACRA and IRAS if it intends to declare itself as dormant. Then, it will have to file a Form C-S/ C waiver to IRAS. This form serves as a waiver from income tax return submission, which can be submitted either by e-filing or submitting its hard copy to IRAS. It must be filed by a dormant company that will not be operating in the coming period. This procedure means that from the year of submission until the time that the company has been declared as active, the company does not have to file the tax form again.

A company declared as dormant does not also have to file any financial statements with ACRA and does not need to conduct any AGM. It can just file a simple annual declaration by filing annual return, stating that the company is dormant and not conducting any business. As a result, the company compliance procedure scales down significantly.

Why Does One May Keep a Company in Dormant Status?

Dormant comapany - One May Keep a Company

Instead of closing a company, a business owner may keep his or her company in dormant status for the following reasons:

  • The company may be temporarily put on hold for future use.
  • The company owner wants to stop operating but not close the company as he or she plans to reactivate it any time.
  • The company may not be generating any income, but it needs to complete some assets or contracts.
  • The company may have rights exercisable over a period of time.
  • The company may want to take a rest from trading and recommence when ready.
  • The company wants to maintain specific licenses.
  • The company owns properties, fixed deposits, and foreign shares.
  • The company owner wants to ensure that his or her company’s reputation and intellectual assets will not go to waste
  • The company owner is undecided about closing the company and may plan to restart it.

Due to any of these reasons, a company owner may decide to let the company be in active status for a few more years and then figure out when to actually close the company.

Can the Company Be Reactivated?

Dormant comapany - Being Reactivated

Yes, a company can be easily reactivated anytime. This can be achieved by notifying ACRA and IRAS via email a month after the company has started operating again, and the company will be revoked of the dormant status right away. Then, the company will have to comply with the general requirements.

The Bottom Line

Dormant companies have very limited compliance requirements. In case your company has met any of the previously mentioned criteria, then you can explore this route of declaring it as dormant and have reduced compliance requirements. Apparently, the cost of maintaining a dormant company is also quite low, especially for companies that are owned by Singapore permanent residents or citizens.

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