The Companies (Amendment) Act 2014 revised the audit exemption criteria and introduced more details on small company concept for audit exemption. The small company concept is applicable to existing and newly registered private limited companies in Singapore with effect from 1st July 2015.
If you are an entrepreneur who had just registered a private limited company in Singapore, or are in the process of company incorporation in Singapore, read on to check on whether these changes will affect your company.
The New Criteria
According to the Singapore Companies Act, every company must get its financial statements and accounting records audited by an auditor on every financial year unless the company meets the audit exemption requirement.
It must qualify at least 2 of the following:
- Total annual revenue of the company must not exceed S$10 million
- The total assets of the company for the financial year must not exceed S10million
- The number of full-time employees at the end of the financial year must not exceed 50.
* For group companies including holding and subsidiary companies, they will be exempted from audit if they qualified as a small group and also fulfill the eligibility criteria as per above.
Change in Company Audit Status
Once the company is classified as a small business, they will enjoy audit exemption benefits unless they;
- Ceases to operate as a private company in their financial year
- Does not satisfy the ‘small company’ conditions
Prior Criteria for Exemption
For prior to the Amendment Act 2014, an Exempt Private Company with an annual turnover less than or equal to S$ 5 Million was exempt from having its accounts audited. An Exempt Private Company is a company that has less than 20 shareholders and no corporate shareholders.
Pursuant to the 2014 Amendment, the criteria has changed. Now, any company defined as a “small company” will be eligible for audit exemption.
Transitional Provisions for existing companies
An existing company can qualify as a “small company” if it is a private company and meets the quantitative criteria in the first or second FY commencing on or after the date of commencement of the “small company” criteria. The following table explains the transitional provisions;
|Qualifying Criteria in the Financial Year (FY)||Small Company|
|The Company meets the Qualifying Criteria in FY 15 and FY 16||Company is a Small Company|
|The Company meets the Qualifying Criteria in FY 15 but not in FY 16||Company is a Small Company since the company meets the criteria in the first year after the introduction of the concept|
|The Company does not meet the Qualifying Criteria in FY 15 but does meet it in FY 16||Company is a Small Company since the company meets the criteria in the second year after the introduction of the concept|
|The Company does not meet the Qualifying Criteria in FY 15 or FY 16||Does not qualify as a small company since the company does not meet the criteria in the first and second year after the introduction of the concept.|
In short, the amendment to audit exemption criteria further simplified the obligation for small business, there are more companies including subsidiaries of foreign companies that meet ‘small company’ will not qualify for audit exemption.
Singapore is attractive for foreign investors as it business-friendly policies that will make the world want to plant roots here. If you are keen to start a business in Singapore, contact us today to see how we can help you.