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In April 2015, the Singapore’s Accounting and Regulatory Authority (ACRA) announced that the legislative changes to the Singapore Companies (Amendments) Act 2014 would be rolled out in two phases. First phase was implemented on 1 July 2015 while the second phase will commence quarter one of 2016.
One of the key changes under the first phase was introduction of new criteria for qualification as a “small company” for audit exemption. The new audit exemption is intended to help reduce regulatory costs for smaller companies that do not have wide market impact, and would result in a reduction in compliance costs. Existing safeguards will however be retained such as requiring all companies to keep proper accounting records and empowering shareholders with at least 5% voting rights to require a company to prepare audited accounts.
The changes take effect for financial periods commencing on or after 1 July 2015.
A private company that fulfils at least two (2) of the following three (3) quantitative criteria in each of the immediate past two (2) consecutive financial years (FYs):
- Total annual revenue of not more than S$10 million;
- Total assets of not more than S$10 million;
- Number of employees of not more than fifty (50)
In order for group companies to be exempted from audit requirements, a parent company or a subsidiary company must be a “small company” and part of a “small group”. The question of whether an entity is part of a group is to be decided in accordance with the Singapore Financial Reporting Standards (SFRS). This principle applies regardless of whether the ultimate parent company is a Singapore or overseas company, and regardless of the financial reporting standards the ultimate parent company may use for the purposes of its consolidation.
The group must satisfy at least two (2) of the following three (3) quantitative criteria in each of the immediate past two (2) consecutive financial years:
- Consolidated revenue of not more than S$10 million;
- Consolidated total assets of not more than S$10 million;
- Total number of employees of the group of not more than 50.
Application of the new “small company” concept in the following scenarios, assuming the company does not form part of a group of companies:-
New companies incorporated after commencement date of “small company” criteria
A company incorporated on or after 1 July 2015 would qualify as a “small company” if it is a private company and meets the quantitative criteria in the FY for which the financial statements are being prepared.
The transitional provisions are applicable to companies that were incorporated before 1 July 2015. Such a company can qualify as a “small company” if it is a private company and meets the quantitative criteria in either the first or second FY commencing on or after 1 July 2015.
A company which has qualified as a “small company” in the first or second FY commencing on or after 1 July 2015 continues to be a “small company” until it is disqualified as a “small company”. Disqualification would occur if it:
- Ceases to be a private company at any time during the FY, or
- Does not meet at least two (2) of the three (3) quantitative criteria for the immediate past two (2) consecutive FYs.
Wholly-owned newly incorporated subsidiary or individually owned private limited Singapore companies may also be accorded various tax exemptions by the Inland Revenue Authority of Singapore (IRAS) when certain qualifying conditions are fulfilled.
Qualifying new start-up companies may enjoy 100% corporate tax exemption from the first S$100,000 chargeable income earned and the next S$200,000 chargeable income is granted a 50% exemption from the prevailing corporate tax rate in Singapore.
The tax exemption is open to all new companies except these two types of companies:
- A company whose principal activity is that of investment holding; and
- A company whose principal activity is that of developing properties for sale, investment, or both.
Services offered by Kensington Corporate Management (S) Pte Ltd include:-
- Formation of Limited Liability Company, Foreign Company Registration, Sole Proprietorship and Limited Liability Partnership
- Provision of registered office and correspondence address
- Corporate secretarial administrative services
- Professional Resident Director
- Cross border structures
The information in this document is not advice of any kind but general information only and should not be relied on as legal advice. Kensington Trust Group recommends seeking professional advice on legal or tax issues affecting you before relying on it. While Kensington Trust Group tries to ensure that the content of this document is accurate, adequate or complete, it does not represent or warrant, express or implied, its accuracy, correctness, completeness or use of any of the information. Kensington Trust Group does not assume legal liability for any loss suffered as a result of or in relation to the use of this document. To the extent permitted by law, Kensington Trust Group excludes any liability for negligence, for any loss, including indirect or consequential damages arising from or in relation to the use of this document.