When a Singapore company goes into liquidation, its tax affairs pass to the liquidator. Under section 59 of the Income Tax Act 1947, the liquidator is answerable for everything required in relation to the company’s tax affairs, and must not distribute any assets to shareholders without first providing for the full payment of tax the company owes. IRAS expects the liquidator to file outstanding financial statements and tax computations up to the date of liquidation, file Declarations of Receipts and Payments during the liquidation, and resolve every tax matter before the process ends. For directors and shareholders, the practical point is that clean books and up-to-date tax filings make a liquidation faster and cheaper.
Raffles Corporate Services works with a panel of experienced Singapore law firms who offer cost-effective and efficient legal service and advice. This article is general information only and is not legal advice.
Get the tax position right before the company goes into liquidation. Unfiled returns, estimated assessments and missing records do not disappear when a liquidator is appointed; they become the liquidator’s first job, at the company’s cost, and they hold up any distribution. Directors who leave the books in disorder may also face questions about how the company was run.
What IRAS requires of a liquidator
From IRAS’s page on companies under liquidation:
- Outstanding years: file the company’s financial statements and tax computations for every outstanding Year of Assessment up to the date of liquidation, by email to IRAS with the subject “Submission of Liquidation Documents”.
- Declarations of Receipts and Payments: yearly if the company has receipts, within 1 month after each 12-month period from the liquidator’s appointment; once every 4 years if it has none.
- The last Declaration: within 7 days of deciding to call the final meeting, which must take place within 6 months of that decision. For a compulsory liquidation, the final meeting is the date of the court’s dissolution order.
- Final financial statements: after the final meeting, covering the period from the start of the liquidation to the final meeting.
- Records: after completion, keep the company’s books and papers for at least 5 years from dissolution.
IRAS says it generally takes 3 months from receiving the last Declaration to complete its review of the company’s corporate income tax matters, and that companies in liquidation do not need to apply for tax clearance before the final meeting.
What changes on day one
- Online access ends. IRAS says all authorisations made by the company terminate when it goes into liquidation, so staff and tax agents lose access to the company’s myTax Portal services. The liquidator applies for Corppass administrator access and can then appoint others.
- The liquidator decides. Directors’ powers largely cease, and decisions on tax filings, objections and payments are the liquidator’s.
- Tax comes before shareholders. Under section 59(2), no distribution to shareholders until tax is provided for in full.
What directors should prepare before a liquidation
- Bring the books up to date and reconcile the bank accounts.
- File every overdue Form C-S or Form C, ECI and GST return. See overdue GST returns.
- Deal with estimated assessments by filing the actual returns and objecting within time. See a Notice of Assessment that looks wrong.
- Plan GST deregistration and the final GST return. See cancelling GST registration when closing a company.
- Settle director and shareholder balances or document them. A liquidator will look closely at amounts owed by directors. See director loans in liquidation.
- Hand over complete records to the liquidator, including tax computations, notices and correspondence.
Example
Example only, not a client case. A solvent holding company is to be wound up by its members. Before the liquidator is appointed, its accountant files the last two Form C-S returns, agrees a small adjustment with IRAS, and pays the tax. The liquidator starts with no outstanding tax years, sells the remaining investment, files one Declaration of Receipts and Payments, and calls the final meeting. IRAS completes its review within its usual timeframe and the surplus is distributed. Had the two returns been outstanding, the liquidator would have had to prepare them first, and the distribution would have waited.
Frequently asked questions
Is a members’ voluntary winding up better than striking off for tax?
It depends on the company’s assets, liabilities and how surplus is to be returned. See the cost to close a company.
Can the liquidator object to an assessment?
Yes. The liquidator is answerable for the company’s tax affairs, including objections, within the normal time limits.
What happens to an IRAS bank agency appointment when the company goes into liquidation?
Get advice from the liquidator; the insolvency rules on how debts are dealt with will apply.
More on the tax and GST hub.
Winding up a company with open tax matters?
If your company is heading into liquidation, or you are a director or shareholder of one, contact the Raffles Corporate Services team at [email protected] or on WhatsApp at +65 8501 7133. We will bring the books up to date, prepare and file the outstanding tax and GST returns, and prepare the records for the liquidator. Where a liquidator or a lawyer is needed, we will introduce you to suitable professionals, including advisers from our associated law firms. This article is general information, not tax or legal advice.
Kevin Yeo, Raffles Corporate Services