Dormant Company

What is a dormant company ?

Under S205B of the Companies Act (CA), a dormant company is a company where no accounting transactions occurs. A dormant company does not carry out active trading. 

As a business owner, one should note that there is a difference in the definition of dormant company between ACRA (Accounting and Corporate Regulatory Authority) and IRAS (Inland Revenue Authority of Singapore as it affects a company’s obligation to file its annual returns with ACRA and the annual tax returns with IRAS.

A accounting transaction is one that has impact on the financial statements of a company. 

ACRA’s definition of Dormant Company

Under ACRA’s definition of dormant company under S205B(2) of the Companies Act, a dormant company is one which no accounting transaction occurs during a financial period.

An accounting transaction is one that has impact on the financial statements of a company. Examples of accounting transactions that result in revenue and expenses such as sales of goods and services to a 3rd party, sales of assets to a 3rd party, purchases of goods and services, purchase of assets from suppliers, employment of staff, purchase and lease of properties, payment of dividends to shareholders, investment in subsidiaries, receiving dividends and managing investments.

 

Disregarded transactions of Dormant Company

Under S205B of the CA, a company will still be defined as a dormant company when a transaction arises from one of the following:

(a) The taking of shares by a subscriber to the company’s constitution;

(b) The appointment of a company secretary under S171 of the CA;

(c) The appointment of an auditor under S205 of the CA;

(d) The maintenance of a registered office under S142, S143 and S144 of the CA;

(e) The keeping of books and registers under S88, S131, S173, S189 and S191 of the CA;

(f) The payment of any fee (including any penalty or interest for late payment) payable under any written law.

(fg) The payment of any composition amount payable under S409B or any written law;

(fb) The payment or receipt of such nominal sum not exceeding such amount as may be prescribed;

(g) such other matter as may be prescribed.

 

IRAS’s definition of Dormant Company

Under IRAS’s definition, a dormant company is one that 

  1. Does not carry on business and
  2. Has no income for the entire basis period.

For example, if a company did not carry on business and had no income for the whole of the basis period ending in financial year 2021, it is regarded as a dormant company for the Year of Assessment (YA) 2022.

Filing annual tax returns with IRAS for Dormant Company

A dormant company must file its Corporate Income Tax Return (Form C-S/Form C-S (Lite) / Form C) by 30 Nov of each year unless the company has been granted a waiver to file Form C / Form C-S / Form C-S (Lite).

 

Applying for a waiver to file Form C / C-S / C-S (Lite)

Your dormant company can apply to IRAS for a waiver to file its Form C-S/ Form C-S (Lite)/ Form C if the following qualifying conditions are satisfied:

  1. It must be dormant and must have filed its Form C-S/ Form C-S (Lite)/ Form C, financial statements and tax computation(s) up to the date of cessation of business.
  2. It must not own any investments (e.g. shares, real properties, fixed deposits). If the company owns investments, it must not derive any income from these investments.
  3. It must have been de-registered for Goods and Services Tax (GST) purposes prior to this application if it had previously been a GST-registered company.
  4. It must not have the intention to recommence business within the next 2 years.

From 1 Oct 2021, you have to apply for the waiver for your dormant company via the Apply for Waiver/ File last Form C-S/ C (Dormant/ Striking Off) digital service (formerly known as Apply for Waiver to Submit Tax Return (Dormant Company)) at mytax.iras.gov.sg. IRAS no longer accepts the hardcopy application.

Specific circumstances to apply for a waiver in writing:

This is only applicable for companies where:

  • The sole director has deceased; or
  • The sole director is a bankrupt.

These dormant companies may write to IRAS with the following details:

  • Name and Unique Entity Number (UEN) of the company
  • Reason(s) for requesting for the waiver of Corporate Income Tax Returns in writing instead of applying via mytax.iras.gov.sg
  • Business cessation date in dd/mm/yyyy format
  • Confirmation that the company has not been carrying on business; does not have trade income; and has not been deriving or receiving income from any investments owned by the company (e.g. dividend, rental, interest income) since the business cessation date
  • Confirmation that the company does not have any intention to recommence business within the next 2 years
  • Financial statements and tax computation(s) for outstanding YA(s) up to the business cessation date, where applicable
  • Name, identification number and designation of the applicant.
 

Capital Allowances, Trade Losses & Donations for Dormant Companies for annual tax returns

Your dormant company cannot claim capital allowances and deduction of expenses incurred in the basis period / financial year relating to the YA in which it is dormant, as it is not carrying on a trade or business during that period. However, unutilized losses brought forward from a previous YA, in which your company was not dormant, can be deducted against income for a subsequent YA if it satisfies the shareholding test.

Your dormant company can make a claim for approved donations if the donations were made to an approved Institution of a Public Character (IPC) or to the Singapore Government for the benefit of the local community.

However, you must file its Form C-S/ Form C-S (Lite)/ Form C using the File Form C-S/ Form C-S (Lite)/ Form C digital service instead of the File Form for Dormant Company digital service at mytax.iras.gov.sg.

Any unutilized donations arising from a YA can be carried forward to subsequent YAs, up to a maximum of 5 years and subject to your company satisfying the shareholding test.

 

Audit Exemption for Dormant Company

Under S205B of the CA, a dormant company is exempted from statutory audit requirements if it has been dormant from the time of its incorporation or since the last financial year end (FYE).

However, under S205B(6) of the CA, any shareholder/s not holding less than 5% of the total issued shares (excluding treasury shares) or not less than 5% of the total number of shareholders (excluding the company itself if it is regarded as a shareholder) may require the company to conduct an audit of the accounts during the financial year but not later than 1 month before the FYE.

Where a notice is received under S205B(6) of the CA from the shareholders requesting an audit of the company’s accounts, the company will not be exempted from the statutory audit requirements.

 

 

Financial Statements obligations for Dormant Company

Under S201A of the CA, the directors of a dormant relevant company are exempted from preparing the financial statements for a financial year if the following requirements are satisfied:

  1. The company has been dormant for the entire financial period in question (i.e. since its incorporation or since the last financial year end (FYE)).
  2. No notice has been received by the directors of the dormant company to prepare the financial statements but the written notice must be issued to the directors not less than 3 months before the FYE.
  3. The directors have lodged with ACRA a statement of dormancy that the company has been dormant for the relevant period under S201A(b) of the CA
  4. The company has passed the substantial assets test where the total assets (or if the company is a parent company, the consolidated total assets) at any time during the financial year do not exceed $500,000 in value or such amount as may be prescribed by the Minister.

In the annual statement of dormancy to be lodged by the directors of a dormant relevant company, the directors must declare the following:

  1. The company has been dormant for the entire year in question (ie. since its incorporation or since the last FYE).
  2. No notice has been received under S201A(3) of the CA
  3. The company’s accounting and other records have been kept in accordance with S199 of the CA.

The following types of companies must still prepare the financial statements but are exempted from audit:

  1. Dormant listed company,
  2. Subsidiaries of a dormant listed company and
  3. Dormant unlisted company which does not satisfy the substantial assets test

 

Recommencing Business

Once your dormant company recommences business or starts to receive any income, the company has to notify IRAS within 1 month from the date of commencement of business or earning / receiving the income by emailing IRAS via myTax Mail to request for the Form C-S/ Form C-S (Lite)/ Form C, with all of the following details (indicate ‘N/A’ if not applicable):

  • Subject header: ‘Recommencement of business and request for Corporate Income Tax Return’
  • Name and Unique Entity Number (UEN) of the company
  • Date of recommencement of business in dd/mm/yyyy format
  • Date of receipt of other source(s) of income (e.g. interest, dividend, rent) in dd/mm/yyyy format
  • New principal activity and the effective date of change in dd/mm/yyyy format together with a copy of BizFile extracted from the Accounting and Corporate Regulatory Authority (ACRA) showing the principal activity of the company

It is an offence if a company fails to inform IRAS when it has recommenced business or started to receive income.

 

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