Thankfully, it turns out that if you’re planning to suspend your company’s activities in Singapore for some time, you don’t really have to close it down. You can, instead, declare it as a dormant company and, subsequently, proceed to capitalize on the corporate and tax benefits that come with the status.
Make no mistake about it, though. Tax filing exemption is not one of the benefits. Yes, that’s right - even when you’re not conducting any business, the government of Singapore still requires you to file the taxes of your dormant company.
But, don’t let it get you worked up. The whole process of filing taxes for a Singapore dormant company is pretty simple and straightforward. We’ll be showing you the ropes shortly.
However, before we dive into all that, let’s first get the basics right. What’s a dormant company according to Singapore law? How do you even apply for dormancy status? And what perks come with company dormancy?
What is a Dormant Company?
As the name itself suggests, a dormant company is basically a Singapore-registered corporation that is not engaged in any form of trading or income-generation. It should not be conducting activities like:
- Investing in subsidiaries.
- Managing investments.
- Receiving dividend payments.
- Paying directors’ salaries.
- Issuing dividends to shareholders.
- Buying or leasing property.
- Selling and buying goods and services.
- Employing workers.
- Paying or receiving funds exceeding the nominal sum of S$5,000.
- Accounting transactions.
In simple terms, a dormant company in Singapore should not be carrying out any business-related activities. And, in the meantime, it gets to enjoy reduced statutory obligations, among other benefits.
The Accounting and Corporate Regulatory Authority (ACRA) and the Inland Revenue Authority of Singapore (IRAS) are the two bodies mandated to regulate dormant companies in the city-state. Interestingly, however, it just so happens that they have slightly different definitions of dormant companies.
ACRA’s Definition of a Dormant Company
According to Singapore’s Companies Act, ACRA recognizes dormant companies in Singapore as registered corporations that remain inactive for a specific period of time without carrying out any accounting transactions.
Now, for the sake of clarity, accounting transactions - in this case- refer to those activities that impact your company’s financial statement. You can, otherwise, think of them as dealings that potentially attract revenue or create expenses for your company.
- Borrowing funds from lenders.
- Issuing dividends to shareholders.
- Selling assets (like machinery and real estate property) to third-parties.
- Purchasing assets from suppliers.
- Selling goods or services to customers.
In short, ACRA doesn’t expect your company to be handling funds during its dormancy period. Otherwise, you’d be risking losing the status of a dormant company.
Don’t get us wrong, though. ACRA doesn’t entirely lock your company out of all corporate transactions. At least you’re allowed to:
- Pay fees, including penalties and interests.
- Keep business registers and books.
- Maintain your company’s registered office.
- Appoint a company auditor.
- Appoint a company secretary.
- Offer company shares to a subscriber who’s featured in the company’s constitution.
That means you’ll be free to administrate your company even in its dormant state.
IRAS’s Definition of a Dormant Company
The IRAS, on the other hand, describes a dormant company as a corporation that hasn’t been carrying out any business, or receiving any form of income, for a period of over 12 months.
If you’re seeking to have your company declared dormant in Year of Assessment (YA) 2021, for instance, the IRAS will review the company’s income stream throughout 2020.
But, get this - while ACRA prohibits dormant companies from incurring expenses, the IRAS contrastingly allows you to process your company’s expense payments. Yes, that’s right - as long your company hasn’t been generating revenue, you get to qualify for dormancy status even with a string of bill payments.
How to Apply for a Dormant Company in Singapore
Fortunately, you’re not required to fill out special applications to have your company declared dormant. You just need to notify the IRAS and ACRA through your company’s annual tax filings.
They’ll then review your company’s parameters based on their respective requirements for dormant companies. And, in the end, only companies that meet both ACRA’s and IRAS’s conditions are granted dormancy status.
How to File Taxes of a Dormant Company
Filing annual returns with ACRA
If your dormant company happens to be listed, ACRA will require you to file its annual returns within five months after its financial year-end. Unlisted dormant companies, on the other hand, are given until seven months after their financial year-end.
The filing process itself should be handled by either the company secretary, director, or registered filing agent. They just need to electronically fill out an annual return form with all the company details - including the names of the company officers, share details, registered address, etc. This should be accompanied by financial statements that demonstrate that the company has not been trading throughout the year.
If that sounds cumbersome, you could alternatively file simplified returns via ACRA’s BizFile+ portal. Here’s the procedure:
- Start by accessing BizFile through https://www.bizfile.gov.sg/
- Go to the “eServices” option along the menu bar, and click on “Local Company”.
- The system will direct you to the local company area. You should then click on “Annual Filing” to access the filing forms.
- From the list of forms, select “Filing of Annual Return by Local Company (FOR FYE FROM 31 AUG 2018)”.
- You’ll find the form already prefilled with your company’s particulars. So, just fill in the rest of the fields, confirm all the details, and then submit the form to ACRA.
- This whole procedure should take about five to ten minutes, and it’ll ultimately cost you about S$60.
Filing Income Tax Return Form with IRAS
Even after filing your annual returns with ACRA, the IRAS still requires you to submit your income tax return form by the 30th of November for paper filing, and the 15th of December for e-filing. This is compulsory for all dormant companies in Singapore - unless you’ve successfully acquired a waiver of Income Tax Return Submission.
Without the waiver - which is normally granted by the IRAS - you should go ahead and e-file the company’s tax returns via Singapore’s myTax portal.
To proceed, though, you have to be authorized in the company’s CorpPass as an “Approver” for “Corporate Tax”. What’s more, you’ll need your CorpPass ID, CorpPass password, and the company’s tax reference number.
Here’s the entire procedure in detail:
- Access myTax portal via mytax.iras.gov.sg.
- Proceed to the “Business Tax Matters” section, and log in to the account using your CorpPass ID, CorpPass passwords, plus the company’s tax reference number.
- Once you land on the dashboard, go to “Corporate Tax” along the main menu, and then click on “File Form C-S/C”.
- You’ll subsequently be required to specify the “Year of Assessment”, plus the form you’d like to use for your dormant company tax filing - whether Form C-S or Form C.
- With that done, you can proceed to fill out the form with your company details, before advancing to the confirmation page - where you’ll be required to countercheck everything.
- If all the details are okay, you can go ahead and hit “Submit” to forward the form to the IRAS. The system will immediately display an acknowledgment page, which you could save and print for the sake of record-keeping.
And that’s all it takes to file the income tax returns of a dormant company in Singapore.
Over to You
Although you could do all the tax filing alone, it’s always advisable to work with a professional tax expert - like Wealthbbridge. We’ll go deep into the nitty-gritty of your company’s financials, and polish up all the details to ensure accuracy and compliance.
What’s more, you can count on us to take care of all your company’s tax filings on your behalf. So, in essence, you won’t really have to do anything.
Get in touch with us today to learn more about our custom tax filing solutions. Besides, our consultations are completely free of charge.