Filing obligations of dormant companies

Last updated on 20 July 2022

Many company owners and officers erroneously assume that as long as their companies are not active, there is no need for them to fulfil their filing obligations with ACRA and IRAS. This has led many companies to be fined for failure to meet these obligations.

As ACRA and IRAS have differing definitions for a dormant company, understanding the difference is crucial in knowing the obligations of a dormant company.

ACRA’s definition of dormant and obligation for filing

Under the Companies Act, a company is dormant if it has no accounting transactions during a financial year. A company is considered active if it has transactions that affect its financial statement (FS), namely transactions leading to entries into its revenue or expenses column in its FS. These transactions include:

  • 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

However, a company will still be defined as a dormant company if a transaction arises from one of the following:

  • 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.
  • The payment or receipt by the company of a nominal sum not exceeding $5,000

A dormant company is still required to file its annual returns with ACRA. However, a non-listed dormant company that has total assets less than or equal to $500,000 may be exempted from preparing FS. In addition, if the dormant company is a parent company, the consolidated total assets of the group must not exceed $500,000. All listed companies or subsidiaries of a dormant listed company are still required to prepare their FS.

IRAS definition of dormant and obligation for filing

IRAS defines a dormant company as one that does not carry on business and has no income for the whole basis period. For example, suppose your company did not carry on business and had no income for the entire financial period ending in 2021. In that case, it is regarded as a dormant company for the Year of Assessment (YA) 2022.

Even if the company was dormant for a particular YA, it is still required to submit its Income Tax Return (Form C-S/ C) unless the company has been granted a waiver on Income Tax Return Submission. If a company has been given a waiver, it must notify IRAS within one month of any resumption of business.

To better understand the above differences, seek the assistance of a company providing corporate secretarial services or corporate income tax services.