In the bustling financial landscape of Singapore, understanding the fiscal year is essential for both local businesses and international investors aiming to navigate the complexities of tax regulations and financial planning in this global hub.
This period not only frames the accounting and reporting practices of companies but also aligns with strategic budget announcements by the government, impacting various aspects of business operations, from investment decisions to tax obligations.
As we delve deeper into the significance of the fiscal year for Singapore’s economic framework, it becomes clear how this annual cycle plays a pivotal role in shaping the country’s financial health and operational efficiencies.
In this blog, we look at the fiscal year in Singapore, and its importance in financial reporting!
What is the Fiscal Year in Singapore?
A fiscal year is also known as a financial year in Singapore. It is the 12-month period that companies and organisations use for financial reporting and tax purposes. It usually begins on 1 April and ends on 31 March the following year.
Companies, however, can choose their fiscal year-end, as long as it is in line with the statutory requirements and is consistent from one year to the next. Some businesses may choose a fiscal year that aligns with their sector’s peak season, and others may choose one that aligns with their budgeting and forecasting cycles.
This also means that a fiscal year can be different from a calendar year, in the sense that it does not have to start on 1 January and end on 31 December.
How Long Can a Fiscal Year Be?
According to the Singapore Companies Act, a fiscal year typically starts on the day of company incorporation and ends on the day of the company’s choice.
Note that although a company’s first fiscal year can extend up to 18 months, the Inland Revenue Authority of Singapore (IRAS) operates in 12-month-long periods. A period longer than 12 months is considered 2 independent periods even if it is a single financial year from a company’s point of view.
When considering the duration, companies should assess how it might directly affect the taxes that must be paid, especially if they wish to use tax exemption schemes. This is also why companies should consider the exemptions they want to file for before determining the date of the first fiscal year end.
Fiscal Year vs Calendar Year
One key distinction between a fiscal year and a calendar year is the time frame they cover. A fiscal year can begin on any date, whereas a calendar year follows the standard timeline, starting on 1 January and ending on December 31st. This variance can influence a business’s financial reporting and planning practices.
Determining the Fiscal Year End (FYE)
The fiscal year end is also commonly known as the financial year end. The Accounting and Corporate Regulatory Authority (ACRA) states that companies in Singapore commonly choose these dates for the end of a financial year:
- 31 March
- 30 June
- 30 September
- 31 December
Companies must also choose whether their accounting period spans 12 months or 52 weeks. For example, for a company with a 12-month accounting period starting 1 January 2024, its FYE will be 31 December 2024. However, if you choose to have a 52-week accounting period that begins on Monday, 1 January 2024, its FYE will be Monday, 30 December 2024
It is important to choose your FYE wisely because it determines when your corporate filings and taxes are due every year. Private companies, in particular, must hold their annual general meeting (AGM) within 6 months after the FYE, and file their annual returns (AR) within 7 months after the FYE.
Can a Company’s FYE Be Changed?
The FYE can only be changed for the current or previous fiscal year. However, it cannot be amended if the statutory deadlines for holding the AGM, turning in annual returns, or filing financial statements have passed.
You must send a notice to the Registrar of Companies (ROC) to proceed with the change. However, you must obtain the Registrar’s approval if:
- The FYE change will result in a financial year longer than 18 months
- It is the 3rd request for a change of FYE
- The most recent FYE change occurred within the last 5 years
What Are the Benefits of Using a Fiscal Year?
Using a fiscal year (FY) instead of the calendar year for financial reporting offers several benefits for businesses, depending on their specific needs and industry practices. The table below explains the advantages:
| Benefit | What it Means |
|---|---|
| Improved Financial Analysis | A fiscal year can give a more accurate view of a company’s performance by aligning financial reporting with its actual business cycle, avoiding distortions caused by peak or low seasons. |
| Enhanced Financial Forecasting | Aligning the fiscal year with operational cycles can improve budgeting and forecasting accuracy, allowing for better comparison between forecasted and actual financial results. |
| Avoidance of Peak Periods | Many companies choose a fiscal year that does not coincide with the calendar year-end to avoid competing with other companies for resources such as auditors, accountants, and financial consultants. This can reduce costs and improve access to external professionals. |
| Tax Planning Flexibility | A fiscal year can provide tax planning flexibility by enabling businesses to manage their financial activities in a way that optimises tax liabilities. This can be useful for timing income recognition or deductions to reduce taxes. |
| Meaningful Financial Comparisons | Some industries tend to use specific fiscal years, and aligning with this can make it easier for companies to benchmark performance against competitors. It also ensures that financial comparisons within the industry are more meaningful. |
| Reporting Flexibility | Companies can customize their fiscal year to better suit their unique operational schedules. For instance, educational institutions may use an academic year as their fiscal year, while governments often follow their own fiscal year schedules for budgeting purposes. |
What Are the Regulatory Requirements for Fiscal Years?
In Singapore, the Inland Revenue Authority of Singapore (IRAS) provides specific guidelines regarding fiscal years for businesses. While companies have the flexibility to choose their fiscal year, it is essential to adhere to IRAS’s requirements to ensure compliance.
Consistency: Once a company selects its fiscal year, it should maintain the same financial year-end consistently across all filings. Any change in the financial year must be communicated to IRAS and approved, along with valid reasons for the change.
Annual Tax Filing: Regardless of the fiscal year selected, companies must submit their Estimated Chargeable Income (ECI) within three months after the end of their financial year. The ECI report provides an estimate of the company’s taxable income for the year.
Tax Returns Deadline: The deadline for filing corporate income tax returns (Form C-S or Form C) with IRAS is November 30 of the following year for paper filing, and December 15 for electronic filing, regardless of when the company’s fiscal year ends.
Alignment With Financial Reporting: Companies are required to ensure that their fiscal year aligns with the preparation and submission of their financial statements and tax returns. The chosen fiscal year-end should reflect the company’s business cycles and reporting practices, allowing for clear and accurate financial documentation.
Change of Financial Year-End: If a company intends to change its fiscal year-end, it must inform IRAS and comply with any conditions they may set. Companies that change their fiscal year-end may need to submit financial statements for an extended period in their transition year.
Understand Your Accounting Obligations With InCorp
Businesses operating in Singapore must be aware of the requirements and deadlines set by the IRAS regarding fiscal years and comply with them for tax reporting purposes and compliance. They should consult with accounting professionals such as InCorp or seek guidance from IRAS for any inquiries or clarifications. Contact our professional accounting team to understand more!
FAQs about Fiscal Year
- A fiscal year (FY) is a 12-month period used by businesses, governments, and organisations for accounting, budgeting, and financial reporting purposes.
- The terms fiscal year and financial year are often used interchangeably, but in some contexts, they may have subtle differences, particularly in how they are applied in different regions or industries.
- One example of a fiscal year is a period between April 1, 2023, to March 31, 2024.
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