[C-SG] How to Save Statutory Fiscal & Tax Cost for a Singapore Company that has not Commenced or Stagnates?

An entrepreneurs who incorporates a company in Singapore may encounter situations that the company's business does not commence as expected or stagnates. Under the aforesaid mentioned situations, the entrepreneur and/or the company’s management is recommended to perform self-assessment whether the company meets the definition and requirement of “dormant company” according to the following guidelines, thereby further saving the local statutory fiscal and tax costs.

[Guide 1] Decision tree and benefit for dormant company

[Guide 2] To assess whether the company meet ACRA’s definition and the exemption criteria for preparation of annual financial statements or not

ACRA’s definition of a dormant company is that a company is dormant during a period in which no accounting transaction occurs.

A company can be classified as the dormant company and exempt for preparation of annual financial statements if below criterial are all met:

(1) the company is not a listed company or a subsidiary of a listed group;

(2) the company has to hold no more than S$500,000 in assets regardless of standalone or consolidated basis (i.e. substantial assets test);

(3) the company has no accounting transaction occurs during the financial year/period.

Further clarification for aforesaid item (3):

- an accounting transaction is one that affects the financial statements of a company, i.e. transactions which bring in revenue or result in expenses, such as: selling goods to customers, purchasing assets from suppliers, selling assets (e.g. property, machinery) to a third-party, issuing a dividend to shareholders, borrowing funds from lenders;

- the company will still be considered to have no accounting transaction if the transaction arises from either one of the following actions:

>> A subscriber to the company’s constitution takes shares in the company

>> The appointment of a company secretary

>> The appointment of an auditor

>> The maintenance of a registered office

>> The keeping of books and registers

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

[Guide 3] To assess whether the company meet IRAS’s definition and criteria for waiver of the tax return filing requirement or not

IRAS defines a dormant company as a company that has not conducted any business and has not received any income over a 12-month period.

A company can be classified as the dormant company and submit application to IRAS for the waiver of the tax return filing requirements if below criterial are all met:

(1) the company has submitted its Form C-S/Form C, on the information related to the company’s past activities, such as company revenue, gross profit, purchases, directors’ remuneration and so on, its financial statements and tax computations up to the date of cessation of business;

(2) the company met IRAS’s definition of domant company and doesn’t have the intention to recommence business within the next 2 years;

(3) the company is not a GST registered entity or de-register for GST prior to the waiver application;

(4) It does not own any investments (e.g. real properties, fixed deposits) or derive any income from investments it owns.

Kindly noted that the outcome of the application is expected to be received within 2 months. Once the company has been granted a waiver, the company will not need to send a yearly waiver application form to IRAS.

[Guide 4] What steps do the dormant company need to take upon recommencing business?

There is no special requirement from ACRA, the company needs to fullfill its local statutory obligation once the company recommence its business.

It is required by IRAS that the company shall notify IRAS of the resumption of business within 1 month from the date of commencement of business. This is done by emailing IRAS the following details to request an income tax return:

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 sources of income e.g. interest, dividend, rent, etc. (if - applicable) in dd/mm/yyyy format

- New principal activity and the effective date of change in dd/mm/yyyy format, together with a copy of a business profile showing the principal activity of the company.

Reference:

◎  Singapore Company Act, Singapore Income Tax Act, ACRA and IRAS website

◎  Public materials from google research

◎  Other public material from peer companies

Recommended linkages:

◎[Q] Summary of FAQs and Replies for Existing Company in Singapore

◎[O-SG] Commonly used Singapore official website

◎[SG] List of Fees – Secretary | Finance (Accounting & Report) | Tax | Others