Dormant Filing in Singapore: What SMEs Need to Know

As an SME owner in Singapore, understanding dormant company status is essential for managing your business efficiently. Dormant status can simplify administrative tasks and reduce costs, but it’s crucial to be aware of the specific requirements and definitions.

What Does Dormant Mean for a Company?

For companies, “dormant” means not conducting any business or generating income. This status is relevant during periods when a company is inactive or has paused its operations.

In Singapore, both ACRA (the Accounting and Corporate Regulatory Authority) and IRAS (the Inland Revenue Authority of Singapore) have specific definitions for dormancy:

• ACRA: A company is dormant if it hasn’t done any business or received any income for an entire year. Even if a company received a small amount (like below SGD 5,000), it could still be considered dormant, as long as it only covered basic expenses like opening fees, accounting fees, or office maintenance.
• IRAS: For tax purposes, a company is considered dormant if it doesn’t have any income, regardless of expenses.

Can a Dormant Company Become Active Again?

Certainly. A dormant company can resume its business activities or start earning income at any time. Once it becomes active, it must follow the usual compliance requirements, just like any active company.

What Does a Dormant Company Still Need to Do?

Even if a company isn’t doing business, there are still a few things it needs to stay on top of:

• Company Secretary: Dormant companies still need to have a company secretary. New companies must appoint one within six months of incorporation, even if they aren’t doing any business.
• Tax Returns: Dormant companies must file a “nil” tax return with IRAS. If they earn any income during the year, they need to file a return for that too. If the company plans to stay dormant for more than two years, it can apply for a tax filing waiver.
• Annual General Meeting (AGM): If a company’s total assets are under SGD 500,000, it doesn’t need to hold an AGM or prepare financial statements.
• Financial Reports (UFS): Dormant companies that are not listed on the stock exchange (and aren’t subsidiaries of listed companies) don’t have to prepare financial statements if their total assets don’t exceed SGD 500,000 and they’ve been dormant since formation or the end of the last financial year.
• Annual Return Filing with ACRA: Dormant companies must file their Annual Return with ACRA, stating their dormant status.
• Audit Exemption: Dormant companies don’t need to undergo audits.

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How to Declare Dormancy

To officially be dormant, the company’s directors need to sign a declaration stating that the company is dormant.

1. Prepare a Declaration: Draft a declaration stating that the company is dormant.

2. Sign and Submit: Have the directors sign the declaration and submit it with the Annual Return to ACRA.

3. Ongoing Updates: Update the declaration annually to ensure accurate records and compliance.

When Can’t a Company Claim Dormant Status?

Not every company can file for dormancy. Here are some cases where dormant status is not allowed:

• Listed companies
• Subsidiaries of listed companies
• Companies with assets above SGD 500,000

Can Holding Companies Be Dormant?

Holding companies (those that own other businesses but don’t do business themselves) usually can’t file for dormancy if their subsidiaries are actively doing business. If a holding company only invests in its subsidiaries without doing anything else, it may still be eligible for dormancy.

Why Stay Dormant?

Dormant companies can enjoy several perks:

• Lower Costs: Fewer business activities mean fewer administrative costs.
• Brand Protection: Dormancy can protect a company’s brand and intellectual property instead of shutting it down completely.
• Future Revival: A dormant company can be revived whenever the owners are ready to restart business operations.

Closing a Dormant Company

There’s no set time limit for how long a company can stay dormant. When the owners decide they no longer need the company, they can choose to close it. This is called striking off, where the company’s name is removed from the register, and it no longer has to follow any compliance requirements.

Summary

Dormant status allows SMEs to manage inactive periods with reduced costs and simpler compliance. In Singapore, ACRA and IRAS have specific criteria that companies must meet even when dormant. Understanding these requirements helps ensure smooth management and an easy transition back to active status when needed.

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