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Determining the Financial Year End

The Companies Act does not specify the date in which a financial year shall commence or end, the decision to determine the financial year, including any changes thereof, is entirely at the discretion of the company.

Under section 175 of the Companies Act, every company must have its first Annual General Meeting (AGM) within 18 months from the date of incorporation. Subsequent meetings have to be held every calendar year with the interval of not be more than 15 months between such AGMs. Having said that, it is not recommended for the Company to fully maximise first accounting period to 18 months as there would be insufficient time to prepare the financial statements.

Each company in Singapore has to determine its own Financial Year End (FYE). The FYE is the completion of an accounting period. A company’s financial year-end does not necessarily need to fall on 31 December and can actually fall on any day within the year. To maximise the coverage of the tax exemption for new start-up companies for its first three consecutive years of assessments, most companies fix their first financial period to end on the last day of the 11th month from the date of incorporation. For example, a company incorporated on 15 April 2018 will likely choose to end its first financial year on 31 March 2019.


Factors to take into consideration when choosing the Financial Year End

Taxation Period

Generally, the basis period (i.e. taxation period) of a company is same as the Company’s accounting period. The first accounting period is the basis period for a year of assessment when the accounts are closed. It would be the first year of assessment for the entity. Please refer to basis period of a company for further details.

Tax exemption for new start-up companies

It is best for the company’s first financial year to be as close as 12 months in order to maximise the coverage of the tax exemption for new start-up companies for its first three consecutive YAs. You can refer to Singapore Corporate Tax Rate for the qualifying conditions of this tax exemption scheme.

For example:

A company that is incorporated on 11 November 2017 is required to hold its first AGM by 11 May 2019 at the latest.

The year end of the company should be fixed on a date before 11 May 2019 at the discretion of the management. However, we recommend that the first financial year should be less than 12 months for tax submission purposes (31 October 2018). This is because any financial period which is more than 12 months will be considered as 2 YA by IRAS for tax exemption purposes.

The differences in determining the year end on 31 October 2018 vs 31 December 2018 are as follows:-

  Year ended 31 December 2018 Year ended 31 October 2018
First YA 11/11/2017 – 31/12/2017 11/11/2017 – 31/10/2018
Second YA 1/1/2018 – 31/12/2018 1/11/2018 – 31/10/2019
Third YA 1/1/2019 – 31/12/2019 1/11/2019 – 31/10/2020


We can conclude that the company will lose its tax incentive for a ten-month period if the company’s financial close is 31 December 2018.

To prevent companies from arbitrarily changing their FYE, the following safeguards will be put in place:

(a) companies must notify the Registrar of their FYE upon incorporation and of any subsequent change;
(b) companies must apply to the Registrar for approval to change their FYE:
– if the change in FYE will result in a financial year longer than 18 months; or
– if the FYE was changed within the last 5 years; and
(c) only FYE of the current and immediate previous financial year (provided that statutory deadlines for the holding of AGM, filing of annual return and sending of financial statements have not passed) may be changed; and
(d) unless otherwise approved by the Registrar, the duration of a company’s financial year must not be more than 18 months in the year of incorporation.
(e) companies with unusual financial year period (not 12 months) should notify ACRA via the notification of change of FYE if they want to avoid applying for approval to change FYE every year
(f) Existing companies will have their FYE deemed by law to be any date previously notified to the Registrar as their FYE date. In the absence of such notification, the anniversary of the date of incorporation will be deemed by law to be their FYE. Companies can change their FYE by notifying ACRA before or after the effective date of the new laws on FYE.


Changes in regulations

The choice of financial year end may also be influenced by changes in government regulations. Changes in recent years are illustrated below.

Audit exemption

Prior to 1 July 2015, a company is exempted from having its accounts audited if it is an exempt private company with annual revenue of $5 million or less. This approach is being replaced by a new small company concept which will determine exemption from statutory audit. Notably, a company no longer needs to be an exempt private company to be exempted from audit.

The new audit exemption is applicable for financial years beginning on or after the change in the law (1 July 2015).

During the transition phase, companies with sizable revenue may opt/change their financial year end to be 30 June 2015 in order to quickly qualify for audit exemption under the new rules.

Productivity and Innovation Credit (PIC)

The PIC scheme has been popular among many businesses since YA 2011. Unfortunately, it is being phased out after YA 2018 (FYE 2017). Expenditure incurred after the basis period of YA 2018 will not be eligible for PIC benefits. In order to maximise the availability of PIC benefits, companies may fix their financial close to fall on December 2017.


Business Cycle

The financial year end does not have to coincide with the anniversary of your incorporation date, neither does it need to coincide with the end of the calendar year. The ideal year-end really has more to do with your business cycles, which vary from business to business.

Businesses that manage a lot of inventory may consider choosing a year-end that corresponds with the end of the busy season and presumably, a time when inventory is at its lowest. This means less inventory has to be counted, which decreases costs and increases accuracy. Furthermore, a quiet time of year makes it easier to close the books as there are fewer transactions in process and more time available from support staff, if needed.


Synchronise the Financial Year with Its Holding Company

There may be requirements for the financial year of a subsidiary company to coincide with its holding company and for group reporting purposes.


Other Considerations

Some corporations may have their fiscal year end determined by other factors such as a franchisee agreement, joint venture agreement and etc. It is a decision that deserves some thought and planning to make the financial year-end as easy as possible to execute, as cost-effective as possible for your business and as tax advantageous as possible to both you and your business. Favourable financial year ends motivated by changes in government regulations may contradict one another e.g. December for PIC and June for audit exemption. Plans to change financial year end should be backed by commercial reasons and not just tax benefits.

Should you have any questions in relation to determining your company’s financial year end, please contact us today.