How To Choose and Change Financial Year End For New Singapore Business Owners

Choosing and changing the financial year end in Singapore is a critical decision that can significantly affect your financial management and compliance obligations. It marks the completion of your accounting period and serves as a basis for financial reporting, tax assessments, and regulatory requirements.

In this article, we will provide a comprehensive guide on choosing and changing the financial year end in Singapore. We will explore important factors, such as start-up tax exemptions, business cycles, and subsidiary relationships. 

Overview of Financial Year End In Singapore

A financial year end in Singapore is the last day of a company’s accounting period. It determines the basis period for tax assessment and affects when the company must prepare financial statements, file Estimated Chargeable Income, hold its Annual General Meeting, and file its Annual Return.

The duration of an accounting period can vary, typically spanning either 12 months or 52 weeks. For instance, if you opt for a 12-month accounting period commencing 1 January 2023, your company’s financial year end will be 31 December 2023.

A financial year end is different from the Year of Assessment. The financial year is the period in which income is earned, while the Year of Assessment is the year in which that income is assessed for tax. For example, income earned during a financial year ending 31 December 2026 is generally assessed in YA 2027. This distinction is important when planning start-up tax exemption claims and tax filing timelines. 

Factors on How to Choose A Financial Year End In Singapore

Considering these factors when choosing your financial year end in Singapore will help you optimize tax exemptions and align accounting practices, ensure compliance with regulatory requirements, and facilitate efficient financial management for your Singapore-based business.

Tax Exemption for Start-ups and Newly Incorporated Companies

When choosing a financial year end in Singapore, it is crucial to consider the tax exemption scheme for qualifying new start-up companies. From YA 2020 onwards, qualifying companies may enjoy tax exemption for their first three consecutive YAs as follows:

• 75% exemption on the first S$100,000 of normal chargeable income; and  
• 50% exemption on the next S$100,000 of normal chargeable income.  

The maximum exemption is S$125,000 per YA. To qualify, the company must be incorporated in Singapore, be tax resident in Singapore for that YA, and meet IRAS shareholding conditions. Investment holding companies and companies undertaking property development for sale, investment, or both are excluded from the start-up tax exemption scheme.

To maximize the practical coverage of the start-up exemption period, new companies should carefully plan their first financial year end. A first financial year that is too short may cause the first YA to be used before the company has meaningful taxable income.

The types of business: Subsidiary

If your company operates as a subsidiary of another company, it is important to synchronize the financial year end of your subsidiary with that of the holding company. This alignment facilitates the filing of consolidated financial statements, avoiding complications and discrepancies in accounting practices between the two entities.

Business cycle 

The nature of your business and its corresponding business cycle is another crucial factor to consider when determining the financial year end in Singapore. Business cycles typically involve fluctuating production, trade, and economic activity, often influenced by seasonal factors.

To ensure efficient bookkeeping and financial management, selecting a financial year end in Singapore that aligns with the end of your business cycle is recommended. Opting for a financial year end in Singapore when there are fewer transactions and inventory is at its lowest can give you more time to manage your accounts effectively.

Other factors 

In addition to the factors mentioned above, there are several compliance requirements associated with the financial year end in Singapore that need to be taken into account:

1. Estimated Chargeable Income (ECI) – Companies must generally file ECI within three months from the end of their financial year unless they qualify for the ECI filing waiver or are specifically not required to file ECI. A company may qualify for the waiver if its annual revenue is S$5 million or below for the financial year and its ECI is nil for the YA. 
2. Annual General Meeting (AGM) – Listed companies must hold the AGM within four months after the financial year end, while non-listed companies must hold the AGM within six months after the financial year end, unless exempt or the company has dispensed with holding AGMs. 
3. Annual Return (AR) – Companies must file Annual Returns with ACRA based on company type and financial year end. Listed companies generally file within five months after FYE, while non-listed companies generally file within seven months after FYE. Longer deadlines may apply where the company has share capital and an overseas branch register. 

Practical Compliance Timeline After Financial Year End

A clear post-FYE calendar helps directors avoid late filing penalties and missed statutory deadlines: 

Obligation	General timeline
ECI filing with IRAS	Within 3 months after FYE, unless waived
AGM for listed companies	Within 4 months after FYE
AGM for non-listed companies	Within 6 months after FYE, unless exempt or dispensed with
Annual Return for listed companies	Generally within 5 months after FYE
Annual Return for non-listed companies	Generally within 7 months after FYE

Directors should review these dates before changing the FYE because ACRA does not allow a company to change its FYE after relevant AGM, Annual Return, or financial statement deadlines have been missed. 

How To Change Your Financial Year End In Singapore

Changing the financial year end in Singapore involves specific steps and requirements to comply with regulations. Here’s a guide on how to change your financial year end:

1. Notify ACRA – Companies must notify ACRA when changing their financial year end. Local and foreign companies can do this through Bizfile. 
2. Change for Current or Immediate Previous Financial Year – Companies can only change the financial year end for the current financial year or the immediate previous financial year. 
3. Consider Statutory Deadlines – A company cannot change its financial year end if it has missed the deadlines for holding its AGM, filing its Annual Return, or sending financial statements.
4. Registrar’s Approval – ACRA approval is required if the new financial year will be longer than 18 months, or if the company changed its financial year end on or after 31 August 2018 and wants to change it again within five years. 

To initiate changing the financial year end, companies should prepare the required documentation and submit the request to the Registrar. Seeking professional guidance or consulting a reputable corporate service provider can ensure compliance with regulations and a seamless transition to the new financial year end in Singapore.

Is It Possible For A Company To Have A Financial Year That Does Not Span Precisely 12 Months?

Companies have the flexibility to adopt a financial year end in Singapore that deviates from the standard 12-month period. Instead, they can choose a 52-week accounting period to suit their requirements. To implement this alternative approach, companies must inform ACRA about the decision.

For instance, if a company decides to begin a 52-week accounting period starting on Wednesday, 1 January 2020, its financial year end will be on Wednesday, 30 December 2020. This adjusted financial year end signifies the company’s accounting cycle completion for that particular year.

Common Mistakes When Choosing or Changing Financial Year End 

A common mistake is choosing a financial year end based only on convenience without considering tax and statutory deadlines. For example, a company with seasonal inventory peaks should avoid closing its accounts during its busiest trading period if this creates unnecessary stocktake or bookkeeping pressure. 

Another common issue is changing the FYE too late. Once AGM, Annual Return, or financial statement deadlines have passed, the company may no longer be able to make the intended change. Companies should also check whether ACRA approval is needed before assuming that the change can be completed automatically through Bizfile. 

How We Can Help

At Premia TNC, our experienced professionals provide tailored advisory services to help you choose the right financial year-end for your business. We consider factors like tax exemptions, business cycles, and compliance requirements to guide you in making an informed decision.

With our in-depth understanding of the financial year end in Singapore, we offer expert insights and recommendations. We stay updated on regulations and industry trends, providing valuable advice to optimize your financial management practices and align your financial year end with your operations.

Premia TNC is dedicated to providing ongoing support and assistance beyond the initial financial year end selection and change. Contact us today for a FREE consultation, and let us be your trusted partner in managing your financial year end in Singapore.

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