A dormant company, in simple terms, is one that has stopped carrying on business activity. That means no trading, no receiving income, no paying dividends, no selling or buying of goods — essentially, a company that is on pause.
In Singapore, two different regulators deal with the idea of dormancy: ACRA (Accounting and Corporate Regulatory Authority) and IRAS (Inland Revenue Authority of Singapore). Both recognise the concept, but their definitions are not quite identical.
For ACRA, dormancy is about the absence of business activity in a given period. For IRAS, the key factor is whether income is being generated. Interestingly, even if a company pays for statutory expenses, that alone does not change its dormant status in the eyes of IRAS. The focus stays squarely on income.
Factors affecting Dormant company status
A company qualifies as dormant if it does not carry out certain trading activities. These activities are fairly wide-ranging and include:
- Entering into accounting transactions.
- Employing staff.
- Selling or purchasing goods or services.
- Buying or leasing property.
- Declaring or paying dividends to shareholders.
- Paying salaries to directors.
- Receiving dividend payments or managing investments.
- Investing in subsidiaries.
On the other hand, there are certain limited transactions that do not disturb dormant status. These include the appointment of secretaries or auditors, maintaining a registered office, paying statutory fees, penalties or interest, and keeping books or registers updated. Even the payment or receipt of small sums — provided they do not exceed SGD 5,000 — does not affect dormancy.
This distinction is important, because many companies might continue some basic compliance work or incur small expenses, but as long as those fall into the permitted category, the company can still be treated as dormant.
Advantages to a Dormant Company
Why would a company want to be considered dormant? There are a few practical advantages, both under ACRA and IRAS rules.
From ACRA’s side, dormant companies enjoy relief from certain compliance burdens. They do not have to prepare full financial statements or hold physical Annual General Meetings (AGMs), provided a few conditions are met. The company cannot be listed, or a subsidiary of a listed company. Its assets must not exceed SGD 500,000 (on a consolidated basis if it is a parent company). And importantly, it must have been dormant since the end of the previous financial year.
IRAS offers its own reliefs. A dormant company can apply for a waiver from filing Form C or Form C-S, subject to conditions. To qualify, the company must have cleared all its filings up to the point it ceased business. It must not hold income-generating investments, and it must have no plans to restart operations for at least the next two years. If the company had GST registration, it needs to deregister from GST as well.
So, dormancy brings with it lighter compliance obligations — but only if the company fits the criteria and takes the necessary steps to apply.
Tax Treatment
A dormant company cannot claim capital allowances or deductions for expenses incurred in a year when it is dormant, because there is no active trade or business happening.
That said, the rules are not entirely restrictive. Losses from earlier years, when the company was active, can still be carried forward and used to offset income in later years when the company resumes business. Similarly, donations can still be claimed as long as they were made to approved Institutions of a Public Character or directly to the Singapore Government for the benefit of the community.
In other words, dormancy does not erase the tax benefits a company has already earned. It only blocks new claims for allowances or deductions during the dormant period itself.
Recommencing of Business
If a dormant company decides to become active again, the process is straightforward, but the company must notify IRAS. The notification must be sent within one month of recommencing business.
The information that needs to be provided is specific:
- The subject header should read “Recommencement of business and request for Income Tax Return.”
- The company must state its name and Unique Entity Number (UEN).
- The date of recommencement of business, and details of the new principal activity if there is one.
- The date of receiving any other sources of income, such as interest, dividends, or rental income.
This notice ensures IRAS knows the company is active again and can issue the appropriate income tax return forms.
Final Thoughts
Dormant status is not just a label — it is a structured regime under Singapore’s corporate and tax framework. For companies that no longer have active business but don’t want to close down completely, dormancy offers a way to reduce compliance costs while keeping the entity alive.
The rules are precise, and the benefits are clear. Lighter reporting, reduced filings, and in some cases no AGMs or tax returns. Yet, the system is balanced. Companies that misuse dormancy or fail to notify IRAS upon recommencement risk losing the very reliefs they were relying on.
For businesses, the key takeaway is simple: dormancy is a practical status, but it must be managed carefully. ACRA and IRAS may define it slightly differently, but both are aligned in the idea that dormancy means no income. Companies that meet the rules can save effort and money, while still preserving the company structure for future plans.
