Facts about a Dormant Company
The main purpose of setting up a company is to do business and make a profit out of it. However, some company are formed and subsequently becomes dormant. A Dormant Company is inactive and does not have any business transaction or activities. The following are some of the common reasons why a company is dormant:
- Incorporate a company and to be temporarily put on hold for future use.
- Business owner decide to ceased operations due to inability to carry on the business but does not intend to close down the company. The dormant company may be “reactivated” at any point of time.
- Maintaining the company status for the purpose of maintaining certain licenses.
- Company that own investment such as properties, fixed deposits and foreign shares.
Dormant Company in ACRA viewpoint
A dormant company do not have any business transaction within the financial period. Unless the accounting transaction is for the professional fee related to compliance requirements.
Dormant Company In IRAS viewpoint
IRAS deemed that a company is dormant when it does not carry on business and has no income for the whole of the financial period. For instance, if a company did not carry on business and had no income for the whole of the financial period ending in year 2020, it will be regarded as a dormant company for Year of Assessment (YA) 2021.
What are the compliance requirements for a dormant company?
Although ACRA exempts the company to prepare financial statements and hold AGM, the dormant company is still required appoint a company secretary and file the annual return within 7 months after the financial year end. Besides that, the dormant company has to submit a tax waiver to get approval from IRAS to release the company for tax filing obligations.
How do I inform the authorities about the company’s dormant status?
The company are required to inform ACRA and IRAS regarding the company dormant status. Generally, the dormant status will be updated to ACRA during the Annual Return filing. Company can notify IRAS by submitting a waiver of tax form to excuse from tax filing obligations.
What are the requirements for a dormant company to be exempted from preparing financial statements?
The dormant company must fulfil all the following requirements:
- The company is not a listed company or a subsidiary of a listed company
- The company hold not more than S$500,000 in assets for both group and company level.
- The company has been Dormant since the formation or at the end of its previous financial year.
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