Financial Year

The financial year is the year in which the company performs its financial closing. In some countries, the financial year is set to end on December 31st of each year. In other countries, companies are encouraged to close their financial year in either March, June, September or December each year.

For companies incorporated in Singapore, the company is free to choose the end of its financial year. So, a company’s financial year can end in any month of the year. Usually, the first financial year does not exceed 18 months. The next financial year is calculated on a 12-month basis. If a company has already determined the end of its financial year, it cannot be changed for the next 2 financial years.

Usually, if a company is registered in a particular month, it will end its financial year by that month of the following year. For example, if the company is registered on April 18, 2020, the company’s first financial year can end on March 31, 2021. Then the next two financial years would end on March 31, 2022 and March 31, 2023.

Some companies facilitate subsequent financial bookkeeping and consolidation to coincide with the parent company’s financial year. They do this by lengthening or shortening the first financial year. (The maximum duration of the first financial year alone cannot exceed 18 months). For example, the parent company’s financial year ends on 31 August 2021. A company that is registered on 19 May 2020 can end its first financial year on 31 August 2021. This would make the first financial year of the company 16 months long (15 months and 13 days).

It is important to note that if the first financial year is longer than 18 months, the accounts and annual audit will not be affected. However, when filing tax returns, the IRAS will split the first financial year into two tax years. The first tax year will be May 19, 2020 through August 31, 2020, and the second tax year will be from September 1, 2020 to August 31, 2021.