What would be the ideal Financial Year End for your Company?

Intending to set up a new company and wondering which financial year end (“FYE”) you should adopt? Or thinking of changing your Company’s FYE?

It is solely at the discretion of the Directors to determine the FYE of your Company. FYE does not have to follow the calendar year and end on 31 December. Typically, most companies choose the end of calendar year or the end of any of each quarter to be their FYE i.e. 31 March, 30 June, 30 September or 31 December.

What is FYE?

FYE represents the completion of an accounting period/year. It is not provided in the Companies Act on fixing and changing FYE. However, based on your Company’s date of incorporation, you can refer to the following to determine your Company’s financial year end.

  Date of incorporation before 31 August 2018 Date of incorporation on or after 31 August 2018
First FYE
  • As per date indicated in its notification to ACRA on financial year end; or
  • As per date indicated in its first annual return; or
  • Anniversary of date of incorporation, if your Company has not filed annual return or notification.
As per date indicated during incorporation, which must not exceed 18 months from date of incorporation, unless otherwise approved by ACRA.

Subsequent FYE would be the anniversary of the first FYE. Going forward, where FYE ends on or after 31 August 2018, the Accounting and Corporate Regulatory Authority (“ACRA”) must be notified of any subsequent change in FYE if (i) the change in FYE will result in a financial year longer than 18 months; or (ii) the FYE was changed within the last 5 years.

You should also note that your Company can only change its FYE for the current and immediate previous financial year (provided that statutory deadlines for the holding of AGM, filing of annual return and circulation of financial statements are not overdue).

Which FYE to select?

Here are some factors you can take into consideration:

Tax exemption

As you may be aware, newly-incorporated companies are eligible for tax exemption for the first three years of assessment (“YAs”). To maximise tax incentives, you may wish to consider adopting your Company’s FYE as the last day of the 11th month from the date of incorporation. How does this work

Assuming your Company was incorporated on 10 September 2020.

 FYE Financial Period Year of Assessment
31 Dec 2021

10 Sep 2020 – 31 Dec 2020

1 Jan 2021 – 31 Dec 2021

1 Jan 2022 – 31 Dec 2022

2020 (First YA)

2021 (Second YA)

2022 (Third YA) 

31 Aug 2021

10 Sep 2020 – 31 Aug 2021

1 Sep 2021 – 31 Aug 2022

1 Sep 2022 – 31 Aug 2023

 2021 (First YA)

2022 (Second YA)

2023 (Third YA)

Based on the above illustration, if your Company opts for its first financial period as 31 December 2021 which exceeds 12 months, it will be regarded as 2 YAs by Inland Revenue Authority of Singapore (“IRAS”) for tax exemption purposes. As a result, your Company has a shorter period to enjoy tax exemption as compared to the option where FYE is 31 August 2021.

Alignment with Holding Company

If your Company is part of a group of companies or is wholly owned by another corporate entity, it might be ideal to adopt the same FYE as the holding company to facilitate audit, group  financial reporting and consolidation.

Alignment with Business Cycle

If your Company’s business nature is seasonal, your Company can opt for a FYE that coincides with its business cycle or inventory levels i.e. corresponds with the end of peak business season or where inventory levels are low. This is so that your Company will not face resource constraints internally when trying to prepare for the closing of the financial year, facilitate stock-taking and complete the annual financial statements.

Other Considerations

Some other commercial factors which you can consider e.g. provisions in shareholders or joint venture agreements, alignment with government regulations or incentives etc. Or perhaps you may want to select a FYE that is not widely adopted by other companies so that your Company is less likely to compete with other companies for external auditors’ resources.

Do Not Forget

Last but not least, do note that other than informing ACRA on the change of FYE, you are also required to inform IRAS. To inform IRAS, you will need to login to mytax.iras.gov.sg and update via the "Update Corporate Profile / Contact Details" e-Service. 

It is important that IRAS is notified on the change in your Company’s FYE. Based on your Company’s FYE, IRAS will send the notification letter on estimated chargeable income within three months from the end of your Company’s FYE.

If you need a checklist or template for the adoption or change of FYE for your Company, feel free to check it out – Change of Financial Year End.

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