One of the few important dates to remember when starting your own business is the Financial Year End (FYE). It affects when you need to file your company’s annual returns (ARs) with the Accounting and Corporate Regulatory Authority (ACRA) and corporate tax returns with the Inland Revenue Authority of Singapore (IRAS).
It is often mistaken that the FYE is the same as the end of the calendar year. This could be because in Singapore, our year of assessment (YA) for individual income tax is based on 1 January to 31 December of each year. However, this does not apply for companies choosing their FYE.
What Does A Financial Year End Mean For Companies And Why Is It Important?
A company’s financial year end (FYE) represents the final day of its accounting period, which is the recognised length of time to complete an accounting cycle. The accounting period provides an outlook on the profitability of the business on an ongoing basis. Companies should maintain the transactions carried out over this period in a record book and report them in the form of financial statements.
The company’s FYE is important as it determines when your corporate filings and taxes are due each year. For instance, private companies are required to hold their annual general meetings (AGM)—a mandatory annual meeting of shareholders where the company presents its financial statements—within 6 months after the FYE.
Additionally, the annual returns—an electronic form lodged with ACRA containing important particulars of the company, such as the names of the directors, secretary, and members—must also be filed within 7 months after the company’s FYE.
Reaad Also: Complete Guide To Singapore Corporate Taxes: Tax Rates, Tax Rebates And Tax Exemptions
How To Choose A Company’s FYE
Assuming the company was incorporated on or after 31 August 2018, the following conditions must be met:
- According to section 198(1)(a) Companies Act, the company’s first financial year should start on the day of its incorporation;
- The first financial period should not be longer than 18 months unless approved by the Registrar; and
- The company’s subsequent financial year must start immediately after the end of the previous financial year. It should end on the last day of a period lasting 12 months or other regular intervals as allowed by the Registrar.
According to ACRA, you can choose the accounting period for the financial year between 12 months or over 52 weeks. For example, if you choose a 12-month accounting period starting 1 January 2024, your company’s FYE will be 31 December 2024. Whereas, if you choose a 52-week accounting period starting Monday, 1 January 2024, your company’s FYE will be on Monday, 30 December 2024.
Though you have the flexibility to choose any date as your company’s FYE, some common choices suggested by ACRA include 31 March, 30 June, 30 September or 31 December.
Ideally, you may wish to have your first year of assessment stretch as long as possible within the 12-month period to make it simple for tax filing purposes with IRAS, which also operates on a 12-month period.
Considerations To Note When Determining A Company’s FYE
When choosing your company’s FYE, it could be useful to consider other factors, such as the following that may have an impact as a result of the choice date:
(a) Tax Exemption For Start-up companies
An important implication that the FYE may have for your company is on your tax obligations and your eligibility to qualify for tax rebates and incentives.
Particularly, new start-ups that commence from YA 2020 would be able to qualify for tax exemptions under the Tax Exemption Scheme for New Start-Up Companies. The following tax benefits are accorded for the first 3 consecutive YAs:
- 75% exemption on the first $100,000 of normal chargeable income; and
- A further 50% exemption on the next $100,000 of normal chargeable income.
Effectively, the tax exemption on the first $200,000 of chargeable income would amount to:
| Chargeable Income | % Exempted From Tax | Amount Exempted From Tax |
| First $100,000 | 75% | $75,000 |
| Next $100,000 | 50% | $50,000 |
Resulting in a maximum exemption of $125,000 ($75,000 + $50,000) for each YA.
Assuming you chose a date longer than 12-months (up to 18 months) for your first FYE, it would be counted as 2-YA by IRAS for tax exemption purposes. For example, if your first FYE is 15 months long, from 1March 2024 to 30 June 2025, IRAS would regard it as 2 years of tax exemption under the above scheme. As such, you will only be eligible for 1 more years’ worth of tax exemption status instead of two.
Therefore, if you are a new start-up and wish to maximise the tax benefits, you should set your FYE either on the last date of the 11th month or as close to the 12-month period from the date of incorporation.
(b) Subsidiary Company
If you’re opening a subsidiary company, it could be easier for you to follow the same FYE as the holding company, making the accounting and documentation process more seamless between the two companies.
(c) Seasonality
If your business has a strong seasonal pattern, such as a florist, home bakery, or even a clothing retail shop, you may wish to time your FYE with the end of the business cycle to better account for your sales and expenses.
For example, a florist may see a pickup in sales towards the end of the year with Christmas and towards the first quarter of the following year, which may have more festive occasions like Valentine’s Day and Chinese New Year. By choosing a FYE on 31 March or 30 June, the business would be able to capture sales and expenses during the high seasonal period and do better inventory management instead of choosing a year-end FYE (i.e., 31 December).
How To Change A Company’s Initial FYE
You could change the initial FYE that you chose during the incorporation of your business by notifying the Registrar. This process can be completed online via BizFile+ with no charges.
You may change the company’s FYE for the current or immediate previous financial year. However, you may not do so if the statutory deadlines for holding an AGM, filing of AR, or submitting of financial statements have passed.
Additionally, you would require the Registrar’s approval to change the FYE will be required if:
- The change in FYE will result in a financial year of more than 18 months; or
- The previously changed FYE was changed on or after 31 August 2018 for a financial year ending on or after 31 August 2018 and it is within 5 years from the end of the previously changed FYE.
Read Also: What Is Your Responsibility As A Company Director In Singapore?
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