XBRL Filing with ACRA for Dormant companies in Singapore

All companies, whether private, limited, or dormant, must comply with the ACRA requirements. This means they have to file financial statements in accordance with their filing requirements by ACRA. Companies may apply for an exemption to filing financial statements in the XBRL format, but they’ll not be exempt from filing financial statements. For instance, if your business removes the requirement for comparative periods in your financial statement, after giving valid reasons, your company can be exempt from filing financial statements in the XBRL format. But, you’ll still be required to submit the company financials in the requisite (PDF) format.

In the vibrant business landscape of Singapore, dormant companies occupy a unique position. Registered entities not engaged in active trading or receiving income, dormant companies, serve a variety of purposes—from holding assets for future ventures, taking a strategic break in operations, to serving as Special Purpose Vehicles (SPVs). The appeal of a dormant company lies in its potential for reduced statutory obligations, offering strategic flexibility and financial efficiency.

What Defines a Dormant Company in Singapore?

A dormant company in Singapore is characterized by its inactivity. It stands apart due to its absence of commercial movement, not engaging in:

Transactions involving accounting
Payments or receipts over S$5,000
Employment of staff
The sale or purchase of goods and services
Property transactions, either through purchase or lease
Distribution of dividends
Directorial remuneration
Dividend receipts or investment management
Subsidiary investments

How Do ACRA and IRAS View Dormant Companies?

What Does ACRA Say?

The Accounting and Corporate Regulatory Authority (ACRA) identifies a company as dormant during periods void of business activities. Nonetheless, exceptions exist, particularly for activities aimed at maintaining compliance with ACRA and the Inland Revenue Authority of Singapore (IRAS). Activities not disrupting a company’s dormant status include:

Secretary appointments
Auditor appointments
Maintaining a registered office
Record and bookkeeping
Fee payments under legal obligations
Composition amount payments
Nominal transactions not exceeding S$5,000

IRAS Perspective on Dormant Companies

The Inland Revenue Authority of Singapore (IRAS) marks a company as dormant when it records no income or revenue over a specified timeframe, even if expenses were incurred. For instance, a company with no business transactions and zero income in 2022 will be recognized as dormant by IRAS in the Year of Assessment (YA) 2023.

How to Navigate the Dormant Company Landscape?

Understanding the nuances between ACRA and IRAS standards for dormant companies is crucial for maintaining compliance while reaping the benefits of dormancy. Whether your objective is to strategically pause business operations, prepare for future ventures, or optimize financial efficiency through reduced obligations, navigating the regulatory environment is key.

In the journey through dormancy, compliance with ACRA and IRAS requirements not only preserves the dormant status but also positions your company for a seamless reactivation when the time comes. Let’s explore the strategic benefits dormant companies offer and how to align them with your business goals in Singapore’s dynamic commercial arena.

Understanding Reduced Filing Requirements for Dormant Companies

Filing Annual Returns with ACRA

Singapore’s Companies Act offers a pathway for dormant companies to streamline their compliance processes. Under Section 201A, dormant companies may be exempt from preparing detailed financial statements, provided they meet specific criteria:

Accounting Transactions: The company must not engage in any accounting transactions.
Listing Status: The entity cannot be a listed company or a subsidiary of one.
Total Assets: The total assets for the financial year should not surpass $500,000, or an amount prescribed by the Minister.
Parent Company: If the dormant entity is a parent company, it should belong to a group whose consolidated total assets do not exceed $500,000, as prescribed by the Minister.

Despite these exemptions, it’s crucial for a dormant company to still prepare management accounts for approval during the Annual General Meeting (AGM), ensuring internal records are up-to-date.

Requirements for Filing Accounts with ACRA

Every year at AGMs (Annual General Meetings), the directors of the company are required to disclose all business-related information to the shareholders. Interlinked documents must also be furnished to the shareholders. Documents such as:-

● Report of Directors & Statement by Directors

● Independent Auditors’ Report (if required)

● Balance Sheet

● Profit and Loss Statement

● Statement of Changes in Equity

● Cash flow Statement

● Corresponding Notes to Financial Statements

These statements are prepared based on reports from independent auditors or directors.

Filing Tax Returns with IRAS

For tax compliance, dormant companies can apply to the Inland Revenue Authority of Singapore (IRAS) for a waiver from the obligation to file tax returns. To be eligible for this exemption, companies must adhere to the following:

Investment Holdings: The company should not own investments (like properties or shares) or utilize them to generate income.
Business Activity: There must be an intention not to engage in any business transactions for the next two years.
Financial Statements: All financial statements and tax computations must be filed up to the point the company ceased trading activities.
GST De-registration: If the company was previously registered for Goods and Services Tax (GST), it must have successfully de-registered.

Is Your Company Eligible?

Annual filings are reports that are given particular importance by ACRA for both active as well as dormant Singapore based companies. So, yes, every company, be it private, limited, unlimited, or dormant are required to file financial statements with ACRA. Failing to meet with ongoing ACRA compliance conditions and requirements can result in severe consequences.

If Your Company is Dormant, then What to do for filing with ACRA?

EPCs that have not carried out any accounting transactions or business activities for the concerned financial year are offered certain types of relaxation:

● The copies of financial statements or consolidated financial statements and balances of the company don’t need to be audited.

● Section 203 of the Singapore Companies Act clearly states that a dormant company can omit any reference to the auditor’s report.

● Dormant companies don’t need to attach accounts and can complete an online declaration of solvency instead.

In any case, a dormant company is required to file accounts with ACRA.

How to Close a Dormant Company in Singapore?

If the decision leans towards ceasing the company’s existence, it’s essential to understand the process of striking off a dormant company in Singapore. The procedure involves ensuring that the company has no outstanding liabilities or assets, obtaining clearance from the Inland Revenue Authority of Singapore (IRAS) and the Accounting and Corporate Regulatory Authority (ACRA), and submitting an application for striking off.

Considerations Before Striking Off:
- Ensure all debts, liabilities, and statutory obligations are settled.
- Confirm there are no ongoing or impending legal proceedings against or involving the company.
- The company should not have any assets at the time of application.

The decision between striking off and keeping a company dormant hinges on the long-term business objectives and the feasibility of reactivating the company in the future. Each option presents its own set of implications for legal, financial, and operational aspects, requiring a thoughtful assessment to choose the best course of action.

Reactivating Dormant Companies in Singapore

Reviving Your Dormant Company

Breathing new life into a dormant company in Singapore signifies a promising venture ahead. However, this process involves specific steps to ensure compliance with the Inland Revenue Authority of Singapore (IRAS) requirements. Whether your dormant company is transitioning back to active business operations or starting to generate income, it’s crucial to adhere to the procedural guidelines set forth by IRAS.

Immediate Steps for Recommencement

Notify IRAS Within One Month: The moment your dormant company recommences business activities or begins receiving any form of income, it’s imperative to inform IRAS within one month from the date the income was earned or received.
Email Communication: Reach out to IRAS by sending an email to ctmail@iras.gov.sg. This communication serves as the official notification of your company’s transition from dormant to active status.
- Subject Header: Use “Recommencement of business and request for Income Tax Return” as your email subject to clearly indicate the purpose of your communication.
- Company Details: Include the name and Unique Entity Number (UEN) of your company in the email.
- Business and Income Information: Specify the date of business recommencement, the new principal activity (if applicable), and the date of receipt of other sources of income (e.g., interest, dividend, rent), if relevant.
Completing Necessary Forms: Besides the email notification, you will need to complete the ‘Request for Income Tax Return (Form C-S/ C)’ and ‘Notification of New Financial Year End’ form. These documents are essential for updating IRAS about your company’s operational status and financial year-end changes.

Ensuring a Smooth Transition

Preparation is Key: Before notifying IRAS, ensure that your business plans, financial projections, and operational structures are in place for a seamless transition.
Compliance with IRAS Guidelines: Adhering to IRAS’s guidelines not only facilitates a smooth reactivation process but also positions your company favorably in terms of tax obligations and financial reporting.

Timely Notifications: Prompt communication with IRAS reflects your company’s commitment to regulatory compliance and financial transparency.

Do Dormant Companies Need to File XBRL?

In Singapore, the landscape of financial reporting for companies, including those that are dormant, is governed by the requirement to file financial statements in XBRL (eXtensible Business Reporting Language) format. This requirement applies universally to all companies, whether limited or unlimited by shares, underscoring the emphasis on transparency and standardization in financial disclosures.

Understanding XBRL Filing Requirements

XBRL filing mandates that companies submit their financial statements in a format that enables automated processing of financial information, facilitating easier analysis and comparison. Enforced by regulatory bodies such as the Accounting and Corporate Regulatory Authority (ACRA) in Singapore, this requirement holds particular significance for dormant companies. Despite their inactive status, dormant companies must adhere to regulatory standards to maintain compliance with ACRA regulations. This ensures that even during periods of inactivity, the integrity and transparency of financial reporting are upheld, aligning with Singapore’s commitment to robust corporate governance and accountability.

Exemptions and Flexibility in XBRL Filing

While the baseline requirement includes the submission of financial statements in XBRL format, there exists a provision for companies to apply for exemptions from certain aspects of the XBRL filing requirements. For instance, companies can request the omission of comparative periods in their financial statements, provided they present valid justifications for such exemptions. This flexibility acknowledges the diverse circumstances faced by companies and allows for a tailored approach to compliance.

Contact the XBRL Experts

Even though dormant companies are exempt from audit requirements, they are still required to file financial statements with ACRA. If you still have any further questions regarding dormant company filing requirements with ACRA, you can seek expert guidance from DataTracks.

DataTracks has vast experience of 19+ years in regulatory reporting solutions across the globe. So reach out to one of our experts at enquiry@datatracks.com.sg and let us help you comply with the ACRA’S XBRL requirements.