All incorporated companies in Singapore, including local companies, foreign companies, variable capital companies, and limited liability partnerships, are obligated to file annual lodgment following their financial year-end. Timely filing of the annual lodgment is a vital statutory requirement since it guarantees timely public disclosure of key details, including the entity’s status and health. Companies, VCCs and LLPs, will be charged with a penalty for late filing of annual declarations and annual returns with ACRA.
ACRA or the Accounting and Corporate Regulatory Authority have revised the penalty for late annual filings with the simplified two-tier penalty. The revision will take effect from 30th April 2021. This article guides you through what you need to know about the revised penalty framework for late annual lodgements.
Why does ACRA Propose the Change?
ACRA aims to simplify the penalty framework, as a whole, to a two-tier system regardless of the types of entity. The change is a part of its ongoing efforts to make compliance easy and encourage LLPs and businesses to carry their statutory duties on annual reporting seriously. Also, this change will make it easier to understand and compute the penalties.
Although the revised penalty framework is only applicable for annual lodgements’ late filing, ACRA stated that it would review and simplify the penalty scheme for other ad hoc filings in the future.
Penalty Framework Changes for Late Lodgment.
The current late penalty and upcoming changes for local companies and variable capital companies or VCCs are as follows:
- Current late penalty: Fixed rate of SGD 300 regardless of lateness.
- Late penalty starting 30th April 2021 and onwards: SGD 300 if filed within three months after the due date and SGD 600 if filed more than three months after the due date.
For foreign companies and limited liability partnerships or LLPs, the current late penalty and upcoming changes are as follows:
- Current late penalty: Eight-tiered penalty ranging from SGD 50 to SGD 350.
- Late penalty starting 30th April 2021 and onwards: SGD 300 if filed within three months after the due date and SGD 600 if the lateness exceeds three months after the due date.
The revised penalty framework will only apply to companies that have filed late, and the payable penalty amount will be imposed and reflected during online lodgement. If the company does not comply voluntarily, ACRA might carry out enforcement actions, including prosecuting the entities or contributing a composition sum in court.
What Does this Change Imply?
Regardless of the entity type, the late filing penalty will essentially become more severe. For instance, for VCCs and local companies, under the current penalty framework before 30th April 2021, the maximum penalty imposed on them would only be SGD 300. However, from 30th April 2021 onwards, while the late filing penalty would be at a minimum of SGD 300, the penalty may go as high as SGD 600 if the filing is late for more than three months due date.
On the other hand, LLPs and foreign companies will be affected the most since their minimum penalty is only SGD 50 under the current framework if the filing is slightly late past the due date. Like VCCs and local companies, the penalty imposed on LLPs and foreign companies under the new scheme would be at least SGD 300 and increase to SGD 600.
What to Do if the Company Is Already Late?
The revised frameworks will only be effective from 30th April 2021. As such, companies should file their annual lodgement before then. They may file an appeal for a waiver of the late penalty. They need to prepare and submit a representative form to ACRA.
Nevertheless, ACRA typically only approves such waive because of urgent or special circumstances. ACRA rarely assent to the following common reasonings:
- Only a nominee or sleeping director
- Have no money or time to handle compliance requirements
- The company is small and do not have the means to hire a corporate secretary or engage with company secretarial services Singapore
- Lack of knowledge on how to use the online system
- The obligation of the hired corporate secretary
- Depend on information that the third-party prepares and did not review the details
- No notifications or reminders received from ACRA
ACRA advised all companies, VCCs, and LLPs to file an annual lodgement on time to prevent the incurring penalty of late lodgement.
Getting Help from Professional Company Secretary Services Singapore
Professional company secretary services Singapore assist companies in preparing and submitting their annual returns and ensure they comply with other relevant regulations and legislations. They also advise the directors and offer any necessary practical support.