Factors to consider when choosing Financial Year End (FYE)
Last updated on 26 May 2022
One of the first major decisions of newly-incorporated companies is deciding on its financial year end (FYE). It is the last day of its accounting period and is typically 12 months or 52 weeks, representing the completion of an accounting cycle of the company.
Most business owners setting up company in Singapore tend to keep to a 12 month accounting period to take advantage of the tax exemptions for the first 3 consecutive Years of Assessment (YAs). The FYE may be more than 18 months for newly-incorporated entities in some cases. However, any financial period of more than 12 months will be considered as 2 YAs by IRAS.
The choice of FYE will also determine the compliance dates for filing the company’s financial returns with ACRA. Companies are required to hold their Annual General Meeting (AGM) within 6 months of the company’s FYE and file its annual returns within 7 months after its FYE. Business owners who need clarification of the compliance dates can approach a corporate secretarial services firm to assist them.
Whatever the choice of FYE, there will always be implications on ACRA and corporate tax compliance. Therefore, regarding the filing of corporate income tax, seeking the help of companies that provide corporate tax services Singapore is advisable, particularly if the FYE straddles 2 YAs.
In some cases, such as a company commencing business much later after its incorporation date or aligning the FYEs of related entities, business owners may choose to change the company’s FYE. Other reasons may include selecting an FYE that is more widely used. Common choices include 31 March, 30 June, 30 September, or 31 December.
Another common reason for changing the company’s FYE is needing more time to prepare for the company’s AGM. However, companies are not allowed to change their FYE if statutory deadlines for the holding of AGM, filing of AR or sending of financial statements have passed.
Finally, companies will need to seek approval from ACRA if the change in FYE results in an FYE of longer than 18 months or if it had changed its FYE within the preceding 5 years. For clarification, it is best to seek the professional advice of companies providing accounting services in Singapore.