Audit Exemption in Singapore: Does Your SME Qualify?

Your accountant says you don't need an audit, but a board member asks for one anyway. A new investor's term sheet quietly assumes audited accounts. However, when you look at ACRA's Companies Act, you might be exempt.

This guide walks through the "small company" test, the group test, the dormant rule, the shareholder override, and what unaudited filing still costs you in admin.

What is audit exemption in Singapore?

Audit exemption lets a Singapore private company file its annual financial statements with ACRA without having them audited by an external auditor. It applies under Section 205C of the Companies Act if the company qualifies as a "small company", and under Section 205B if the company is dormant. (ACRA, Audit Exemptions)

Exempt does not mean unfiled. You still prepare full unaudited financial statements, a directors' statement, and submit them with your annual return through BizFile+. You also still file corporate income tax with IRAS on the usual schedule, regardless of audit status.

What counts as a "private company"?

Audit exemption only applies to private companies. A private company is defined under Section 4(1) of the Companies Act as a company whose constitution:

• Restricts the right to transfer shares (typically requiring board approval, often with pre-emption rights for existing shareholders)
• Limits membership to 50 shareholders or fewer (employees and ex-employees who hold shares are not counted)
• Prohibits any invitation to the public to subscribe for shares or debentures

If your company was incorporated in Singapore as a Pte Ltd ("private limited"), it is almost certainly a private company by default; that is the point of the Pte Ltd structure. You would only fall outside it if you converted to a public company, typically because you crossed the 50-shareholder limit or wanted to offer shares to the public.

Two sub-categories worth knowing:

• Exempt Private Company (EPC): a private company with 20 or fewer individual shareholders and no corporate shareholders. Solvent EPCs get a filing concession (financial statements in PDF rather than full XBRL).
• Public company: unlimited shareholders, can offer shares to the public, faces stricter disclosure and audit rules. Always audited, never eligible for the small-company exemption discussed below.

For most Harvest clients running a Pte Ltd, the audit exemption framework is the relevant lane. The next section walks through the three thresholds that determine whether your private company qualifies.

The "small company" three-of-three test

To qualify under Section 205C, a private company must meet at least 2 of these 3 criteria for each of the immediately preceding 2 consecutive financial years:

Here's an example: a tech start-up with FY2024 revenue of S$3.2m, total assets of S$1.1m, and 18 staff hits all three criteria comfortably. They're a small company. In FY2025 they raise a Series A, total assets jump to S$12m, but revenue is S$8m and headcount is 32. They still hit two of three (revenue + headcount). They remain exempt.

The following year in FY2026 it then grows to S$14m revenue, S$15m assets, 60 staff. They've now failed all three criteria for one year. Because the exemption test looks back two consecutive years, FY2026 is still covered by the FY2024–FY2025 lookback. They can prepare the FY2026 statements unaudited, then expect to lose exemption from FY2027 onwards if they remain over the thresholds.

How the figures are measured

The three numbers are measured in the way your financial statements measure them:

• Revenue is total revenue as reported in the statement of profit or loss under the Singapore Financial Reporting Standards (SFRS) or SFRS for Small Entities. It is the top line: turnover and other operating income that meets the SFRS revenue definition. Other income, gains on disposal, and finance income that sit below the revenue line do not count toward the threshold.
• Total assets is the balance-sheet figure at financial year-end (current assets plus non-current assets), at book value per SFRS.
• Number of employees is the headcount at the financial year-end. It includes full-time employees on the company's payroll. Independent contractors and outsourced staff who are not on payroll are excluded.

What if my company is brand new?

Newly incorporated companies are assessed under simplified rules in the Thirteenth Schedule:

• First financial year: assess on year 1 alone. Meet 2 of 3 criteria in year 1 and you qualify.
• Second financial year: assess on years 1 and 2. Meet 2 of 3 in both years and you qualify.
• Third financial year onwards: standard rule, assess the immediately preceding 2 consecutive financial years.

The group test (for subsidiaries)

If your company is part of a corporate group, the entire group must qualify as a "small group" on a consolidated basis. The same 2-of-3 thresholds apply, but they apply to the consolidated revenue, total assets, and headcount of the whole group across the immediately preceding 2 consecutive financial years.

Two practical implications:

• A small Singapore subsidiary of a large multinational does not qualify for audit exemption, even if the subsidiary itself is well under S$10m revenue. The parent group's consolidated revenue blows the threshold.
• A holding-and-trading company structure that all sits in Singapore must be tested at the group level. If consolidated revenue exceeds S$10m, no entity in the group can claim exemption, even the dormant ones.

Before this reform, having corporate shareholders automatically disqualified a company from audit exemption. The "small group" framework relaxed that and shifted the test to consolidated thresholds. (ACRA, Reducing Compliance Costs for Small Companies)

Dormant companies are exempt under a separate rule

Dormant companies are exempt from audit under Section 205B, which is a different exemption from the small company concept. Two practical differences:

• Eligibility is broader. The dormant exemption is not limited to private companies; public dormant companies can use it too.
• No size thresholds. A company is dormant if it has had no accounting transactions during the financial year (with narrow exceptions: appointment of a secretary, payment of fees to ACRA, share issuance by the founders).

If you've parked a company between projects and it has zero transactions, you may be able to file dormant accounts with no audit, regardless of size. Our guide to filing tax for a dormant company covers what dormant filing involves on the IRAS side.

The 5% shareholder override

Even if a company qualifies for audit exemption, shareholders representing at least 5% of the total issued shares can require the company to conduct an audit by giving written notice no later than 1 month before the end of the financial year. (Section 205D)

This is the rule that catches founders who think audit exemption is automatic. If a minority investor or family-office shareholder writes in within the window asking for an audit, the company must oblige for that financial year. The cost is borne by the company, not the requesting shareholders.

Companies that can never claim audit exemption

The "small company" exemption applies only to private companies. Companies excluded entirely:

• Public companies (whether listed or not)
• Companies regulated by MAS as financial institutions: banks, insurers, capital markets services licensees, etc.
• Foreign companies registered in Singapore as branches (different filing regime under Part XI of the Companies Act)
• Any company that fails the small company test, or whose group fails the small group test

What you still owe ACRA when you're exempt

Audit exemption is exemption from the audit, not from the rest of the compliance ceremony. You must still:

1. Prepare full financial statements complying with SFRS or SFRS for Small Entities, depending on which standard you've chosen
2. Sign a directors' statement confirming the financial statements give a true and fair view
3. Maintain proper accounting records sufficient to explain the company's financial position
4. File the annual return with ACRA within 7 months of FYE (private companies), attaching the unaudited financial statements
5. File financial statements in XBRL format through BizFile+. Most small private companies file Simplified XBRL (revenue and total assets each ≤ S$500,000) or Full XBRL; solvent Exempt Private Companies (≤ 20 individual shareholders, no corporate shareholders) may file FS in PDF only
6. File corporate income tax (Form C-S, C-S Lite, or C) with IRAS on the normal schedule
7. Hold an AGM within 6 months of FYE unless you've elected to dispense with AGMs (private companies can)

Our annual return guide covers the BizFile+ workflow.

How to claim audit exemption

There is no audit-exemption application form. The mechanism is purely declaratory:

1. Confirm you meet the test for the last 2 financial years (or current/year-2 lookback for new companies). Document the figures.
2. File the unaudited financial statements with the annual return via BizFile+, marking the exemption status.
3. Keep the supporting working papers internally. ACRA can request evidence that you met the thresholds.
4. Tell your auditor (if you had one) that you're not reappointing them. Pass an ordinary resolution to that effect at the AGM, and notify the registered auditor in writing.

If you're transitioning from audited to unaudited, expect the first set of unaudited financial statements to take longer than usual to prepare; your accountant has to set up the standalone preparation workflow that previously sat with the auditor.

When does audit exemption lapse?

You lose exemption when the company fails to meet at least 2 of the 3 thresholds for 2 consecutive financial years. The lapse is automatic; there is no notice from ACRA. The first audited year is the year following the second consecutive failure.

ACRA also retains a Registrar override: if the Registrar finds that the company has failed to keep proper accounting records (Section 199) or has not laid the financial statements at AGM (Section 201), it can direct the company to file audited financial statements regardless of small-company status.

Run a check at every year-end. We track the three thresholds for our clients on each FYE so the question is answered before anyone has to ask.

Quick scenarios

Frequently asked questions

Do I need to apply to ACRA for audit exemption? No. There is no application form. You declare your status when filing the annual return via BizFile+ and keep internal records of the figures supporting your claim.

Does having a corporate shareholder disqualify me from audit exemption? Not anymore. Under the small company framework, only the consolidated group test matters. A private company with a corporate shareholder can still be a "small company" if the group consolidated figures meet 2 of 3 thresholds.

My company is in its first financial year. Can I be exempt? Yes. Newly incorporated companies are assessed on the current FY in year 1 and on years 1 + 2 in year 2. So if you meet 2 of 3 criteria in year one, you're exempt that year.

Can I switch back from audited to unaudited? Yes, if you re-qualify. Once your last 2 consecutive financial years both meet the small company test, you're eligible to drop the audit again.

My investor wrote in asking for an audit. Do I have to comply? If they hold ≥ 5% of the total issued shares and gave notice no later than 1 month before the end of the financial year, yes. The company bears the cost.

Is a dormant company audited? No. A dormant company is exempt under Section 205B regardless of size. You still file dormant accounts with the annual return.

Let Harvest handle audit exemption end-to-end

Most of our SME clients qualify for audit exemption every year, and the few that don't, we communicate smoothly with one of the audit firms we work with. We prepare the unaudited statements, run the small-company eligibility check, file the annual return, and flag any year where your numbers are heading toward the thresholds. Book a free consultation and we'll take audit-exemption admin off your desk for good.