A company’s fiscal year refers to a company’s financial period. Typically, in almost all scenarios, this would be a 12-month period. The most common fiscal year would be the calendar year (i.e. 1st January to 31st December). However, companies are accorded flexibility in selecting their fiscal year. There may be a multitude of considerations. A company may align their fiscal year with the anniversary of the company’s incorporation. For example, if the company was incorporated on the 1st of June of a particular year, the company may choose to set their financial period as the 1st of June to the 31st of May. Similarly, a company may align its fiscal period with the fiscal cycle of its parent company.
In the business context in Singapore, as stated earlier, a fiscal year spans 12 months, distinct from the calendar year and subject to variation among entities. Upon incorporating a new company in Singapore, it is imperative to designate the first fiscal year-end (FYE), which dictates the deadlines for corporate filings and tax obligations.
The fiscal year is a defined timeframe employed by organizations to compute financial metrics, encompassing income, expenditures, and taxes. It serves as a structured timeline for financial reporting and planning. Although typically spanning 12 consecutive months, the fiscal year need not align with the conventional calendar year, often chosen based on organizational or governmental preferences. For instance, businesses may opt for a fiscal year corresponding to peak industry seasons or aligning with budgeting and forecasting cycles.
Following the selection of the FYE, it is crucial to inform the Inland Revenue Authority of Singapore (IRAS), as deadlines for unaudited financial statements, annual reports, and tax filings are contingent on this date. Outsourcing accounting services for Singapore companies facilitates the management of this information, alleviating the responsibility of preparing necessary documents within the prescribed timeline.
As per the Accounting and Corporate Regulations Authority (ACRA), common choices for the end of the financial year in Singapore include 31 March, 30 June, 30 September, or 31 December. According to the Singapore Companies Act, a fiscal year typically commences on the day of company incorporation and concludes on a date of choice. The first financial year cannot exceed 18 months, with subsequent fiscal years lasting 12 months, starting the day following the previous fiscal year-end.
Careful consideration is paramount when selecting the FYE during incorporation, including deciding whether the accounting period spans 12 months or 52 weeks. Although the initial fiscal year may extend up to 18 months, the IRAS operates within 12-month periods, potentially impacting taxes, especially in the context of tax exemption schemes. Thus, strategic planning for exemptions is advised before finalizing the FYE.
Changing the end of the financial year is feasible only for the current or preceding fiscal year, subject to certain conditions. Approval from the Registrar is necessary if the proposed change exceeds 18 months, constitutes the third request for FYE alteration, or occurs within the last 5 years from the last changed FYE. Additionally, changes are precluded if statutory deadlines for Annual General Meetings, annual returns, or financial statement submissions have lapsed.
The editorial team at Singapore Secretary Services
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