While we all know that the calendar year starts from January 1 and ends on December 31, it is not the same for business enterprises in Singapore. In this article we will try and learn something more about the financial year in Singapore. We are sure it will be useful for those business entities that are planning to start their commercial activities in this country. There are some unique features and facts about financial year as far as Singapore is concerned and it would be interesting to know more about it.
What Is the Financial Year End
Each company that is doing business in Singapore has to determine the Financial Year End, or FYE, on its own. Unlike many other countries, the government does not have any specific FYE set for all companies that do business in Singapore. For the information of readers, FYE is basically the last date for the completion of an accounting period. There are no hard and fast rules that the financial year end and calendar year end should be one and same in Singapore.
How Companies Can Make Use Of FYE
The company has the liberty to choose its own financial year end's beginning and ending, for finalizing its accounts and reporting it to the general public, and also to the statutory authorities. However, many companies decide on the FYE in such a way that it helps them to make the best of tax exemption. This is all the more applicable for startup companies. It would be pertinent to mention here that startup companies in Singapore enjoy lucrative tax exemption for the first three consecutive years of tax assessments. What many startups do is fix their FYE in such a way that it will end on the last day of the 11th month from the date of incorporation, to maximize their tax incentives. To cite an example, if a company is incorporated on April 15, 2018 in Singapore, it will most probably choose March 31, 2019 as the financial year end.
The FYE Rules Are Flexible
It should be noted that the Companies Act in Singapore does not have any mandatory date on which the financial year shall come to an end, nor does it prescribe any specific 12 month period as the financial year beginning and end. In other words, the discretion to determine the starting date and ending date of a financial year is left fully to the companies themselves.
There Are Some Strings Attached
While the freedom to change financial year Singapore is certainly unique and very helpful for business houses, the government and the tax authorities have put in place checks and balances. This has been done to prevent companies from changing their financial year abruptly and regularly. There are some rules that govern FYE changing. This is applicable to all companies that have their FYE ending either on the 31st of August, 2018, or before that date. The rules governing such companies are as mentioned below.
- The companies must inform the authorities (Registrar) regarding their FYE once they have incorporated the firm.
- Any changes must also be relayed to the registrar.
- In case they want to change the FYE they cannot do it arbitrarily. A written consent must be obtained from the Registrar if the FYE would lead to the financial year dragging to more than 18 months. Furthermore, such written permission is also needed if the FYE has been changed in the last five years. However, there are some relaxations to the above rule.
- The Registrar may allow changing of the FYE of the current as well as the immediate previous financial year. However, this will be permitted only if the deadlines for holding AGM, filing of returns and submitting other financial statements have been met properly.
Points to Be Considered When Choosing a Financial Year
- The taxation period is generally the same for the company as per the account period that has been set by the company.
- The first account period is considered to be the basis for fixing year of assessment going forward.
- If startup companies would like to take advantage of the tax holiday in Singapore, it would be better if their first financial year is kept close to the 12 months period. This will help them get the maximum coverage of the tax exemption for startups in Singapore.
The Final Word
While Singapore offers flexibility in fixing the financial year end, the companies should ensure that they are transparent in using this facility and they do not try and take advantage of the same.
When setting your financial year-end and managing compliance requirements, it’s essential to have expert guidance on your side. WealthBridge offers top-tier accounting service Singapore that streamline financial reporting and ensure compliance with Singapore’s regulations. Additionally, our tax consultants help businesses optimize their tax positions and navigate financial obligations seamlessly. With WealthBridge’s support, your company can efficiently plan its fiscal strategies while focusing on growth.