Fiscal Year: Meaning and Choosing the Date
Your company’s fiscal year-end affects how you do your accounting and tax submissions. Read on to discover more about choosing a fiscal year for your business and what you’ll need to consider along the way.
Starting a new company? When you register your company in Hong Kong, you are entitled to set your year-end date.
What Does Financial Year Mean?
A fiscal year is an annual period your business uses for accounting and preparation of financial statements linked to the running of your business operations. The bookkeeping and accounting records maintained for your business will be concerning the company’s fiscal year-end date.
Your Company’s First Fiscal Year-End (FYE)
In Hong Kong, a company’s fiscal year starts on its incorporation date. However, your fiscal year-end date doesn’t necessarily have to follow the date of incorporation. Your company’s directors have the authority to decide on the financial year end date.
If you decide not to pick a fiscal year-end date per the new Companies Ordinance, the financial year-end date will be set automatically as the last day of the month of the company’s incorporation’s first anniversary.
Incorporation date: 1 March 2022
Financial Year End: 31 December
First Financial Year End: 1 March 2022 - 31 December 2023
If a company has subsidiaries, the director’s board should make sure that each of its subsidiaries' financial year is aligned with the corporation’s fiscal year.
When you're trying to determine your company's financial year-end date, consider thinking from an accounting and tax perspective to set a date that’s most beneficial for your business.
Changing My Company's Fiscal Year End
You’re in charge of setting the dates for your company’s fiscal year-end date. Common choices according to the Companies Ordinance include 31 December or 31 March, to coincide with the Hong Kong Government’s financial year.
What To Consider When Deciding on a Financial Year End Date
When you're trying to determine your company's financial year end date, consider thinking from an accounting and tax perspective to set a date that’s most beneficial for your business.
3 reasons to change your company's fiscal year-end
- Current FYE date not set by you
Newly incorporated companies occasionally fail to choose a fiscal year-end date under the Companies Ordinance legislation. In these cases where no date is stated by the company’s directors, the fiscal year-end date is automatically assigned as the last day of the month of the company’s incorporation’s first anniversary. You may want to change this date if it’s not in line with what’s most beneficial for your business and operational needs.
- To streamline parent company FYE
It’s common practice to align your fiscal year-end date with affiliated companies for consolidation purposes (especially if it's a subsidiary of a larger parent company). The alignment of your company and your larger parent company or subsidiary’s Financial Year End date means a simpler accounting process.
- To improve cash flow
Picking a Fiscal Year End date that works best for your company has a direct impact on your bottom line. It determines whether your annual profits tax return deadline aligns - or clashes with - your company’s peak season. With a strategically sound fiscal year-end date, you reduce the risk of cash flow issues in the foreseeable months that you are required to pay tax.
Best dates for fiscal year-end: 2 tips
We have 2 tips for you to quickly read through, but if you want a further read considering the dates from an accounting and tax perspective, we have an article for you.
Tip 1: Choose 31 December OR 31 March
As we mentioned above, one is the calendar year-end and the other coincides with the financial year of the Hong Kong Government. This is also the reason why the Inland Revenue Department would offer an extension for corporations with these two financial year-ends. Remember, you can also choose any financial year-end date between 1 April to 30 November.
|FYE||Standard Issue Date||Standard Filing Date||Profits Tax Return Extended Due Date|
|From 1 April to 30 November (Accounting Date Code “N”)||April's first working day in the following year of assessment||2 May||
No extension will be granted
(Typically end of April)
|From 1 December to 31 December (Accounting Date Code “D”)||2 May/ 15 August||Extension to 30 September|
|From 1 January to 31 March (Accounting Date Code “M”)||2 May/ 15 November||Extension to 30 November|
Tip 2: pick the end of a month
As financial statements follow the calendar months, companies should always pick the end of a month as the fiscal year-end date. If you choose an FYE in the middle of the month, it could complicate your accounting process.
How To Change My Company's Fiscal Year-End?
Looking for a Corporate Secretarial services provider in Hong Kong? Drop us a chat to find out more.
Get in touch with your Corporate Secretary to change your company’s fiscal year-end date at any time. There are also a few FYE restrictions you should note:
- After you’ve made a change in your company’s fiscal year-end, the first financial year must not exceed more than 18 months
- Your company’s fiscal year-end date cannot change to one that results in audited financial statements and other related documents from AGM being submitted that same financial year
- After changing the fiscal year-end date the first time, you’ll need shareholders’ approval unless you’re doing so to sync up with your holding company’s FYE
- A company limited by guarantee or a public company is required to report any change in financial year-end within 15 days and inform the Companies Registry
If your company has previously changed the financial year-end date, then you may only take on a new one under certain circumstances:
- Your company directors have a good business-related reason for this change
- If your business’s fiscal year-end was adjusted within 5 years, it cannot be changed again unless the alteration is to align with the holding company’s financial year-end date
What do I do next to change my fiscal year-end?
Once you’ve reviewed the period best suited to business cycles, you apply online to adjust your FYE. Don’t forget that you then have only 15 days to report that change to the Companies Registry.
Prefer focusing on business growth?
Leave the paperwork of running your business to a group of trusted experts. The Osome team can help with corporate secretary tasks, bookkeeping and accounting for small to medium businesses in Hong Kong.