Dormant Company

Summary: A registered company that’s been inactive for a full financial year.

Imagine a company as an office where no one shows up to work. No buying, selling, salary payments, or hiring happens. There are no shares being issued, nor any investment returns or other business. This is what a dormant company looks like.

A dormant company is a company that’s been inactive and hasn’t recorded any accounting transactions for a full financial year. Singapore’s ACRA and IRAS have slightly different rules for identifying dormant companies and providing related exemptions.

 

ACRA’s Definition of a Dormant Company

According to ACRA, a company is dormant if it’s not had any accounting transactions in a financial year, except for a few things like hiring a company secretary or an auditor, keeping up with books and registers, maintaining a registered office, or paying certain fines, fees, or amounts as per the law. Moreover, exchanges of a trivial amount not exceeding $5000 also don’t count.

For a company to be recognised as dormant and avoid the need to prepare financial statements and hold Annual General Meetings (AGMs), it must be dormant since its founding or the end of the last financial year. The company also shouldn’t be a listed one or a subsidiary of a listed company. Additionally, it can’t hold more than $500,000 in assets, including the assets of any subsidiaries, at any point in the last financial year.

 

IRAS’ Definition of a Dormant Company

According to IRAS, a company is considered dormant if it hasn’t made any revenue or income during the financial year, even if it’s had some expenses. While dormant companies must still e-file their Income Tax Returns every year, there are exceptions. Companies can request an exemption via an e-service, given they meet a few criteria.

 

Reasons to Keep a Dormant Company

Companies that want to pause their operations can choose to keep the business dormant instead of shutting it down. For a small annual fee, you can keep everything associated with your company, like your brand name, goodwill, patents, licences, and intellectual property, ready for the day you might re-start your operations.

 

How to Restart a Dormant Company

Wake-up call for a dormant company? No problem! As soon as the company starts earning any income, it has to inform IRAS within a month. This is done by writing to ctmail@iras.gov.sg to request an Income Tax Return. Or, you can also contact 3E Accounting.