The Singapore Fiscal Year plays a vital role in the country’s financial system.
As a global business and finance hub, Singapore operates on a unique fiscal calendar. Compliance with national regulations is essential when submitting annual returns and tax documents, which depend on their FYE. Understanding the key players in Singapore’s financial market is crucial for navigating the complexities of the FYE.
What is FYE?
The FYE is a crucial date that signifies the conclusion of a business’s accounting period.
This choice can significantly impact the financial reporting, tax obligations, and overall financial management of the company or business. A company in Singapore has the option not to close their business financial year end on 31 December.
The FYE marks the final day of the company’s financial year. When this date arrives, the company secretary is responsible for filing the Annual Returns with the Accounting and Corporate Regulatory Authority (ACRA). Meanwhile, the tax agent will handle the filing of the corporate tax returns with the Inland Revenue Authority of Singapore (IRAS).
Differences Between FYE and Calendar Year.
FYE
The FYE of a company marks the conclusion of its accounting period, which usually occurs every 12 months. In Singapore, each company must decide its own FYE, as it can fall on any day of the year, not just December 31.
Calendar Year
A financial year follows the calendar year, starting on January 1st and ending on December 31st.
The Law Governing FYE
Section 198(1)(a) of the Companies Act:
- the company’s first financial year starts on the company’s date of incorporation
- different sets of rules on determining a company’s FYE will apply depending on whether the company was incorporated before, on or after, 31 August 2018
| Companies incorporated on or after 31 August 2018 | Companies incorporated before 31 August 2018 | |
| First FYE | The first financial year starts on the company’s date of incorporation.
It ends on the date provided to ACRA during incorporation. The first financial year must not be longer than 18 months from the date of incorporation. |
The last day of the company’s first financial year is the date provided to ACRA in the annual return or notification that the company had last filed with ACRA.
If the company has not filed such an annual return or notification, the company’s last day of the financial year will be the anniversary of the company’s date of incorporation. |
| Subsequent FYE | FYE is deemed to be the anniversary of the FYE date previously notified to the Registrar. | FYE is deemed to be the anniversary of the FYE date as determined using the rules above. |
Factors To Consider When Choosing FYE
Tax Exemption for Newly Incorporated Companies and Startup Businesses in Singapore
When selecting a financial year-end for a newly established start-up in Singapore, it’s essential to consider the tax incentives available under the tax exemption scheme for start-ups. This scheme, introduced from Year of Assessment (YA) 2020 onwards, provides the following benefits for the first three consecutive YAs:
| Chargeable Income | % Exempted from Tax | Amount Exempted from Tax |
| First $100,000 | 75% | $75,000 |
| Next $100,000 | 50% | $50,000 |
To fully take advantage of these exemptions, it’s advisable for start-ups to choose a FYE that falls on the last day of the 11th month following their incorporation date.
*Tax exemption is not applicable for:
– A business primarily dealing with investment holdings and earning investment income; and
– A business undertaking new property development for sale and/or investment
Subsidiaries
If a company is a subsidiary of another, it’s crucial to align the FYE of the subsidiary with it’s holding company. This synchronization simplifies the preparation of consolidated financial statements and helps prevent complications or discrepancies in accounting practices between the two entities.
Inventory Management
For businesses that depend heavily on inventory, selecting the appropriate FYE is essential for accurate inventory valuation. Choosing the right period to end the financial year when the inventory is at its lowest can streamline the valuation process and offer a clearer view of the business’s financial health.
Business Cycle
It’s important to consider the nature of the business and its associated business cycle. Business cycles often fluctuate due to seasonal factors affecting production, trade, and economic activity.
To enhance bookkeeping and financial management, it’s advisable to choose a FYE that coincides with the conclusion of the business cycle. Selecting a date when transactions are minimal and inventory levels are low can provide you with more time to manage the business’ accounts efficiently.
Other Relevant Factors
Estimated Chargeable Income (ECI): Companies are typically required to file their ECI within three months after the FYE. Some companies may qualify for an ECI waiver or receive administrative concessions.
Annual General Meeting (AGM): Listed companies must hold their AGM within four months after the end of their financial year, while non-listed companies have six months. Adhering to AGM requirements is crucial for ensuring transparency and accountability in corporate governance.
Annual Return (AR): After the AGM, companies are required to file their AR. The deadlines for filing depend on the company’s listing status and whether it maintains a branch register outside of Singapore.
Can FYE be Changed?
Yes.
If a company is already operational and the company wishes to change the FYE of their company, they may simply do so by notifying ACRA, through the BizFile+ website using the “Change of Financial Year End” transaction, which is free of charge.
Generally, only the FYE for the current or immediately preceding financial year can be changed. ACRA does not permit changes if statutory deadlines for holding the Annual General Meeting (AGM), filing Annual Returns, or sending financial statements have already passed.
Additionally, ACRA must approve any FYE change that extends the financial year beyond 18 months or if it has been less than five years since the last FYE change.
Reasons to change FYE
Tax Remittance
When remitting taxes, a Singapore business may choose to change its FYE for reasons such as operational convenience, liquidity, and industry benchmarking, particularly if it earns most of its revenue in a specific month. This adjustment can be beneficial, as it allows the business to have sufficient cash flow to comfortably meet its fiscal obligations during that time.
Financial Reporting
The FYE can be changed for the purposes of financial reporting, particularly to highlight favorable results from the business’ busiest period. This adjustment allows the company to present a more positive overall performance to investors, showcasing their business in a strong light.
Strategic Reasons
A publicly traded company in Singapore may change its FYE for stock-trading reasons, aiming to influence industry performance and mitigate negative fluctuations in its share price. By being the first to announce its operating results, the company can potentially gain a “benefit of the doubt” from investors, who might refrain from lowering the share value even if the results are disappointing later on.
Synchronise the Financial Year with the Holding Company
A subsidiary company may be required to align its financial year with that of its holding company for consolidation and group reporting purposes.
Must A Company’s Financial Year Be Exactly 12 Months?
No.
Companies in Singapore have the option to adopt a financial year-end that differs from the standard 12-month period. Instead, they can opt for a 52-week accounting period tailored to their needs. To implement this approach, companies must notify ACRA of their decision.
For example, if a company starts a 52-week accounting period on Wednesday, 1 January 2020, its FYE will be Wednesday, 30 December 2020. This adjusted FYE marks the completion of the company’s accounting cycle for that specific year.
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