Dual Definitions for SG Dormant Companies

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2023-08-03

In Singapore, the Accounting and Corporate Regulatory Authority (ACRA) and the Inland Revenue Authority of Singapore (IRAS) have distinct definitions for dormant companies. It's essential for businesses to understand these definitions, as a company deemed "dormant" by the IRAS might be considered "active" by ACRA. Failing to meet the criteria set by both authorities could impact a company's annual filing and tax obligations.

ACRA's Definition of Dormant Companies:

To qualify as a dormant company for ACRA, a company must not have engaged in certain accounting transactions in the past year. Declaring a company as dormant simplifies the annual filing process. The accounting transactions that must be absent from the company's records include:

1) Sales of goods to customers
2) Purchases of assets from suppliers
3) Selling assets (e.g., property, machinery) to third parties
4) Distributing dividends to shareholders
5) Borrowing money from lenders

However, even if the company doesn't have the above transactions, it will still be considered dormant if the following actions occur:

1) Allotment of shares to subscribers in the company's constitution
2) Appointment of a company secretary
3) Appointment of an auditor
4) Maintaining a registered office
5) Keeping books and registers
6) Paying any fees required under any written law (including fines or interest for late payments)

IRAS's Definition of Dormant Companies:

IRAS defines a dormant company as one that has not conducted any business or received any income within the last 12 months.

For instance, if a company didn't engage in any business or receive income in the year 2019, IRAS would consider it a dormant company for the tax year 2020 (Year of Assessment, YA).

It's worth noting that even if a company is deemed dormant by IRAS, it may still be required to submit its financial statements to ACRA for annual reporting purposes.

Understanding the different definitions of dormant companies by ACRA and IRAS is crucial for Singaporean businesses. Complying with both definitions is essential to avoid any complications in the annual filing process and taxation obligations.

For more information on Singapore dormant company registration and other related topics, feel free to contact us via WeChat (WeChat ID: Skyline-Ng) or WhatsApp us at +65-91328885.

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