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 financial year in Singapore. We are sure it will be useful for those business houses 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.
Each company that is doing business in Singapore has to determine the FYE or Financial Year End 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 not hard and fast rules that the financial year end and calendar year end should be the one and same in Singapore.
The company has the liberty to choose its own financial year end 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 start-up 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. Hence it is quite obvious that most startup companies 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 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.
It would be pertinent to mention here 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 ending. In other words, the discretion to determine the starting date and ending date of a financial year is left to the full discretion of the companies.
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 31 August, 2018 or before that date. The rules governing such companies are as under.
While Singapore offers flexibility in fixing the financial year end and does not straightjacket the same, the companies should ensure that they are transparent in using this facility and they do not try and take advantage of the same.