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