Once you have decided to incorporate your company, you’ll have to choose your first Financial Year End (FYE). Regardless of ownership or business entity, all businesses in Singapore need to have a fiscal year.
A company’s FYE, also known as fiscal year-end, is a one-year period that businesses and government bodies use to prepare financial statements and all accounting matters. This crucial period will determine when your corporate filings and taxes are due and can help business owners in the planning of their company’s short and long-term financial goals.
Let’s dive deeper into everything you need to know to choose your FYE date for your company.
As stated in the Singapore Companies Act, your company’s Financial Year should typically start on the day of company incorporation. That’s why choosing your date of incorporation is also important in this process. However, if companies have a different date in mind, Singapore grants companies the option to choose their FYE within 18 months of their incorporation date.
Unless the Registrar allows you to do so, any business’ first Financial Year cannot exceed 18 months. From there, all subsequent financial years should start on the following day after the end of the previous financial year. For instance, if your first financial year ends on 31 March, your following FYE will commence on 1 April.
For Singapore-based companies, it is still best to have your financial year be as close to 12 months as possible in order to take full advantage of tax exemptions granted through the Tax Exemption Scheme for New Start-Up Companies.
Eligible companies will be given tax exemptions for their first three consecutive Years of Assessments (YA), which can lessen their tax burden in the early stages and put more money towards other important aspects of their business growth.
Click here to learn more about the importance of assessment years for Singapore-based businesses.
For businesses in specific sectors such as retail, travel, and food and beverage, your company’s seasonal business activities can also affect how you choose your FYE. These are periods of time where a company experiences variations in different months of the year. For example, restaurants and bars may see a climb in their revenue during important holidays such as the New Year and Christmas while travel agencies will experience an influx in customers during school breaks.
For companies with a strong seasonal component, consider choosing a fiscal year at the end of the business cycle. This is strongly recommended as you are required to collate financial statements as part of your annual stock-taking.
If you happen to be registering a subsidiary company, it would be most beneficial if your FYE is aligned to that of the holding company. While this is not compulsory, having the same FYE can ensure that the documentation of all relevant requirements including tax filing can be processed with ease all at the same time.
Let’s do a quick recap of everything you need to know when choosing your FYE date. To simplify the accounting process and for ease of memory, always go for a date that’s both simple and memorable like 30 June or 31 December. For businesses with seasonal activities, opt for a lull period so you can make the time to focus on your accounts. Finally, have your financial year be 12 months to maximise tax exemptions.
With that, you’re all set! Chosen your date?