Dormant Companies Accounting and Compliance Requirements – Singapore
Dec 24, 2024
5 min read
0
29
0
In Singapore, the concept of a dormant company is an important consideration for businesses that do not carry out any significant business activity. Whether you are a business owner looking to maintain a dormant company or are seeking advice on compliance requirements, this article will help you understand the key aspects of dormant and semi-dormant companies' accounting and regulatory obligations.
What is a Dormant Company?
A dormant company in Singapore is defined as one that has not engaged in significant accounting transactions during a financial year. This means that the company has not conducted any business activities or transactions, such as the sale of goods, provision of services, or any other form of economic activity. It also does not include transactions related to shares, loans, or intra-group transfers within the company. Dormant company has a slightly different interpretation from the perspective of the Accounting and Corporate Regulatory Authority (ACRA) and the Inland Revenue Authority of Singapore (IRAS).
ACRA Definition: No business activities except statutory expenses in relation to the maintenance of the company's compliance matter with IRAS/ACRA. Examples include corporate secretarial expenses, appointment of auditors, and maintenance of a registered office.
IRAS Definition: When a company does not have any income or revenue for a given period of time.
There are many reasons why dormant companies exist. One main reason is when a company is planning to use this company for a specific purpose. In other cases, a company might have run down its business activities and is transitioning.
What are the Accounting Requirements for Dormant?
In Singapore, all companies, including dormant and active companies, must comply with accounting regulations set by the ACRA and the Singapore Financial Reporting Standards (SFRS). However, the accounting requirements for dormant companies are slightly relaxed compared to active companies.
Filing Financial Statements: Dormant companies are still required to prepare and file financial statements, but these documents may be much more straightforward. According to ACRA, dormant companies can opt for a simplified version of the financial statements, given that there are no significant transactions to report. In this case, companies typically file an Exemption from Financial Reporting under certain conditions, where the company confirms its dormant status to ACRA. These conditions include not having any accounting transactions, not being a listed company or a subsidiary of a listed company, having assets not exceeding S$500,000, and not being a subsidiary of a group where assets exceed S$500,000.
Audit Exemptions: Dormant companies are eligible for audit exemption under Section 205B of the Singapore Companies Act if they meet specific criteria, such as having no significant accounting transactions.
Director's Responsibility: The directors of a dormant company are still legally obligated to ensure that the company complies with accounting regulations and submits the required documents on time. This includes preparing annual financial statements and filing them with ACRA.
What are the Other Compliance Matters for Dormant companies
In addition to dormant company accounting requirements, these companies in Singapore must comply with various other regulatory obligations. These compliance matters ensure that the company remains in good standing with ACRA and continues to meet its legal responsibilities.
Taxation Compliance: A dormant company is not required to file corporate tax returns if it has no income to report. However, the company must apply to IRAS for a waiver to file a tax return. There are some qualifying conditions for this waiver.
Corporate Secretarial Requirements: A company must maintain its corporate governance standards even if it is dormant. This includes the appointment of a company secretary within six months of incorporation and keeping up with statutory records. Changes in the company's registered office or directors must be reported to ACRA promptly.
General Meetings: Dormant companies must still hold an Annual General Meeting (AGM), even if they have no significant business activities. During the AGM, the company must confirm its dormant status and address any relevant statutory matters.
Compliance with Statutory Deadlines: All dormant companies must adhere to statutory deadlines for filing documents with ACRA, including the Annual Return, financial statements, and tax returns. Missing these deadlines can lead to penalties or even the company's being struck off the register.
Dormant Vs. Semi-Dormant Companies
There is always confusion between a dormant and Semi-Dormant company, especially when the latter company is defined as a special purpose vehicle (SPV). This is a common tool used by large MNCs, where a company is specifically created to serve a purpose. This purpose could range from holding an asset temporarily to part of a larger merger and acquisition process, maritime lease arrangement, or other business arrangements.
Semi-dormant companies can have very minimal transactions. Although they can resemble dormant companies with very minimal operational activities, the distinction between them should be read in accordance with statutory guidelines. Depending on where it lies, a semi-dormant company may or may not fall within the definition of a dormant company. It would be best to seek professional clarification if unsure, as this may impact compliance requirements.
How Our Company Can Help
As a trusted accounting and compliance firm based in Singapore, we offer tailored solutions for dormant and semi-dormant companies to ensure compliance with all accounting and regulatory requirements. Our services include:
Preparation and Filing of Financial Statements: We assist dormant companies in preparing and filing simplified financial statements with ACRA, ensuring that all requirements are met.
Audit Exemptions: We can help determine whether your company qualifies for audit exemptions and ensure the appropriate documentation is submitted to ACRA.
Tax Filing and Compliance: Our team will assist you in preparing and filing the nil tax returns with IRAS. For dormant companies seeking a waiver, we will evaluate if the qualifying conditions are met and help with the application.
Annual Return and Corporate Secretarial Services: We file your company's Annual Return and ensure that all corporate secretarial requirements are met, including AGM preparation and record-keeping.
Ongoing Compliance: We provide support for maintaining statutory records and ensure timely compliance with all regulatory deadlines to keep your company in good standing.
With our expertise in Singapore's accounting and compliance landscape, you can rest assured that your dormant company will meet all legal requirements, allowing you to focus on other business matters.
Conclusion
Managing a dormant company in Singapore requires a clear understanding of accounting and compliance obligations. Though not complex, it can be confusing to distinguish what exactly is regarded as a dormant company under different interpretations from ACRA or IRAS. While these companies may not have significant business activities, they still have regulatory responsibilities that must be fulfilled to maintain good standing with ACRA and IRAS. If you want to ensure that your company remains compliant with all accounting and regulatory requirements, our firm can offer comprehensive services to handle your needs efficiently.
References
https://singaporelegaladvice.com/law-articles/dormant-companies-filing-obligations-singapore/
-----------------
DISCLAIMER: The views and opinions expressed in this article are those of the author and do not necessarily represent the views and opinions of any individuals or organizations with which the author may be affiliated, either in a professional or personal capacity, unless explicitly stated.
-----------------
Related Posts
