Singapore’s New Amendments to the Companies Act: the Annual Audit Exemptions for Small Firms Explained

Posted by Reading Time: 5 minutes

auditQualifying small companies in Singapore can now benefit by foregoing a yearly financial burden – annual audits. The new regulations arise from the amendment of Singapore’s Companies Act in October, 2014 – the most sweeping change made since the law’s original promulgation in 1967.

The first set of alterations to the city-state’s corporate law arising from the new amendments to the Companies Act came into force July 1, 2015, with the rest set to be implemented later in 2016.

The most significant aspect of the amendment to foreign and domestic investors alike is the reclassification by the Accounting and Corporate Regulatory Authority (ACRA) of the criteria by which a corporation can be defined as a small company under Singaporean law. Such a regulatory distinction is important because qualifying small companies enjoy fewer regulatory burdens; namely exemption by ACRA from annual audit requirements, the costs of which can put a strain on the financial resources of small companies. Under the old regime, private limited companies qualified under Singaporean law as Exempt Private Companies (EPCs) if:

  1. Annual revenue is less than five million SGD (US$3.61 million)
  2. Have less than 20 shareholders
  3. Have no corporate shareholders
  4. Are not part of a larger business group

Established by an earlier 2003 amendment to the Companies Act, the EPC designation was envisaged to increase the ease of doing business in Singapore for entrepreneurs and small-and-medium enterprises (SMEs) by reducing regulatory hurdles – chiefly the annual audit requirement.

Related-Reading-Icon-Asean Link RELATED: Applying for Permanent Residency in Singapore

Instead of preparing and filing an annual audit with ACRA, EPCs may simply submit a declaration of solvency signed by relevant company directors and the company’s secretary. However, EPCs must still keep records of financial statements following Singapore’s Financial Reporting Standards (FRS) on file in case ACRA requests them. Considered in tandem with the other regulatory advantages granted to EPCs (such as the loosening of strict regulations on what types of loans directors of larger companies may accept), it is clear why investors in Singapore have made EPCs the city-state’s most popular corporate structure.

Under the framework laid down by last year’s amendment to the Companies Act, starting July 1, 2015, the criteria for a company to qualify as “small” has been both simplified and loosened to include over 25,000 new companies, according to the Singaporean Senior Minister for Finance and Transport. The new eligibility requirements are as follows:

  • Annual revenue is less than $10 million SGD ($7.22 million USD)
  • Total assets not exceeding $10 million SGD ($7.22 million USD)
  • Less than 50 employees

Therefore, not only does ACRA’s new regime streamline and simplify the eligibility criteria, but it moreover allows for a large expansion of firms qualifying for the statutory audit exemption.

Important to note is that the new regime’s guidelines no longer require that a company officially qualify as an EPC in order to enjoy the audit exemption. Therefore, companies with more than 20 shareholders which previously were required to file an annual audit with ACRA will now count as exempt as long as their revenue and employee totals do not exceed the amended Companies Act limits. However, to combat potential fraud risks and safeguard shareholder rights, companies in which outside shareholders control over five percent of voting rights will be mandated to perform the statutory audit, regardless of size.

Using the new small company standards, eligibility for audit exempt status is decided based upon whether a given firm meets the quantitative criteria for either the first or second fiscal year (FY) following commencement of the new regulations – namely FY 2015 or 2016. That company would then continue to be eligible for the small company audit exemption until it fails to meet the criteria for two consecutive fiscal years, or ceases being a private company. For companies incorporated after the promulgation of the new audit exemption criteria, eligibility for small company status is based upon its meeting the quantitative requirements in its first two fiscal years after establishment.

To illustrate, if a firm which qualified for the exemption in FY 2015 or FY 2016 no longer meets the quantitative criteria for FY 2017, but then once again met eligibility requirements in FY 2018, it would continue to be an audit exempt small company. However, if it failed to meet the quantitative requirements for both FY 2017 and FY 2018, it would no longer qualify as audit exempt.

Thus, by further reducing the regulatory burden for investors and expanding its audit exemption framework to accommodate larger firms, Singapore lives up to its annual high ranking in the World Bank’s Ease of Doing Business report. Not only does the new small company exemption regime allow more SMEs to cut costs by foregoing audit fees, but it simplifies the operational complexity of entering the Singaporean market, thereby helping ensure that the city-state continues to be an attractive destination for foreign direct investment.


Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email or visit

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

Related-Reading-Asean Book Title

The Gateway to ASEAN: Singapore Holding Companies
In this issue of Asia Briefing Magazine, we highlight and explore Singapore’s position as a holding company location for outbound investment, most notably for companies seeking to enter ASEAN and other emerging markets in Asia. We explore the numerous FTAs, DTAs and tax incentive programs that make Singapore the preeminent destination for holding companies in Southeast Asia, in addition to the requirements and procedures foreign investors must follow to establish and incorporate a holding company.

An Introduction to Tax Treaties Throughout Asia
In this issue of Asia Briefing Magazine, we take a look at the various types of trade and tax treaties that exist between Asian nations. These include bilateral investment treaties, double tax treaties and free trade agreements – all of which directly affect businesses operating in Asia.


The 2015 Asia Tax ComparatorAB 1214 Cover small small
In this issue, we compare and contrast the most relevant tax laws applicable for businesses with a presence in Asia. We analyze the different tax rates of 13 jurisdictions in the region, including India, China, Hong Kong, and the 10 member states of ASEAN. We also take a look at some of the most important compliance issues that businesses should be aware of, and conclude by discussing some of the most important tax and finance concerns companies will face when entering Asia.