Tax obligations for businesses before dissolving a Singapore company

When dissolving a company in Singapore, businesses must not only complete the legal process but also fully comply with tax obligations. 

This is to ensure that the dissolution is carried out legally and avoid legal consequences. 

The following article by GLA provides an overview of the corporate tax obligations to be fulfilled when closing a company in Singapore including key processes, compliance obligations, and steps to take.

1. Cases of company closure in Singapore

Companies in Singapore will have to go through 1 of 2 company closure processes as follows:

• Cancel business registration (Striking off): Suitable for companies that no longer have obligations or debts to pay.
• Dissolution of enterprise (Winding up): For companies with remaining obligations to fulfill, debts to pay to the government, creditors
  • Members' Voluntary Winding Up: Suitable for companies that wish to carry out the dissolution themselves.
  • Creditors' Voluntary Winding Up: Used when a company is unable to pay its debts and needs to be wound up to pay its creditors.
  • Compulsory Winding Up: When a company is ordered to be wound up by a court order due to a breach of the law or inability to pay debts, it requires court supervision.

Regardless of which method of closing a company is used, the tax obligations to be complied with in both methods are similar.

2. Tax obligations when closing a company in Singapore

2.1 Tax obligations of operating companies

To ensure a successful application for winding up of a company to ACRA, the company is required to pay all taxes owed to IRAS. In the event that the company fails to pay its tax obligations, IRAS has the right to reject the application for winding up of the company.

The company owner needs to ensure:

• All outstanding corporate income tax returns (Forms CS/C) have been filed. If the company is filing Form C, tax returns and calculations must also be filed.
• The return and tax calculation must be submitted before the date the company ceases to carry on business (i.e. during the period before IRAS issues its Corporation Income Tax Return).
• All tax payable to IRAS must be made in full (e.g. all questions raised by IRAS have been answered, all assessments completed and payments completed); and
• The company deregisters for GST and ensures full payment. GST tax in the year of dissolution.

Normally, IRAS will complete the company closure procedure within 1 month after receiving full information from the enterprise.

In complex cases with insufficient information, IRAS will request additional documentation and extend the review period by up to 6 months.

Tax Notice Letter:

IRAS will not issue a tax clearance letter for the purpose of a company's application for winding up. The company must rely on the following documentation, with the assistance of the GLA, to determine that the company has no outstanding tax matters:

• Latest tax notice (NOA- Notice of Assessment) and;
• Latest Statements of Accounts.

2.2 Tax obligations of a dormant company 

For companies that have ceased operations (Dormant company) since the date of establishment or since the filing of the last tax return, the company is allowed to file an Application for Income Tax Exemption.

Submit the application along with a Cover Letter stating your intention to dissolve. If the tax exemption application is approved, the company does not need to file any outstanding tax returns. 

3. Notes when closing a company to ensure success

The company will not close the company bank account until all outstanding issues have been resolved. Once the company bank account is closed and the company has tax credits, IRAS will not be able to pay tax credits to third parties such as directors and shareholders.

The company needs to ensure that it has fulfilled all tax obligations, handled any complaints, if any, and fulfilled all debt obligations in full.

When a company is liquidated, the tax credit is transferred to the IPTO (Insolvency Public Trustee's Office) or the State Trustee's Office. Shareholders can contact them if they want to claim a refund of the tax credit.

4. Post-closure compliance in Singapore

5. How does GLA support businesses to comply with tax requirements when setting up a company in Singapore?

GLA with its knowledge, experience and practice in supporting companies in Singapore, will assist the company in:

• Advise you on the best way to close your company.
• Take care of all tax matters and handle any complaints.
• Help you manage all required steps before the company is officially closed.
• Submit your application and follow up to make sure the process goes as smoothly as possible.

6. FAQs on Singapore company dissolution

Highlights

• Singapore companies should complete their income tax, GST, and other taxes before proceeding with liquidation.
• Confirm your tax status with IRAS and obtain a tax clearance certificate to ensure there are no outstanding debts.
• A final tax return is required to ensure all income up to the date of dissolution has been declared.
• After dissolution, financial records and important documents should be kept for at least 5 years to deal with future audits.