How to choose a Corporate Fiscal Year-end Date

Different businesses in Canada opt for different fiscal year periods.

March 27, 2022

Businesses in Canada may select different fiscal year periods. For instance, corporations can opt to have their fiscal year-end date on a date of their choosing, while sole proprietorship and partnerships can apply to the Canada Revenue Agency (CRA) to change their fiscal year-end date.

If you recently incorporated your business, you might be thinking about when your year-end date is or when it should be. This article will explain different factors when deciding on your year-end date. It will help you select the suitable year-end date for your business. We'll also address some strategies to help you decide on a convenient year-end date.

What is Fiscal Year-End?

Fiscal year-end refers to completing any one-year or 12-month accounting period other than a typical calendar year. A company's fiscal year can be different from the calendar year and may not close on December 31 due to the nature of a company's demands. Once the companies choose the fiscal year-end, usually when they are first incorporating their company, they must stay with it a year to year. 

How do I choose my fiscal year-end?

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The fiscal year-end for your company can be any date within 53 weeks from your incorporation date. The fiscal year-end will be set once you file your first T2 corporate tax return. Please review our article A Step-by-Step Guide to T4 Forms for more information about T4 slips. In order to avoid penalties, the T2 tax return must be filed within three months after your business's fiscal year-end date. So it’s better to set your fiscal year-end when you initially incorporate your business

Three main factors to consider when selecting your year-end date

You need to focus on the following three factors while choosing the year-end date:

1. Your incorporation date

It means you get more than 18 months from the time you are incorporated to the time you have to file your taxes. New businesses have more expenses in their first year of operations, so delaying some costs can be pleasant.

It means you get more than 18 months from the time you are incorporated to the time you have to file your taxes. New businesses have more expenses in their first year of operations, so delaying some costs can be pleasant.

2. Tax planning

You may need to consider tax planning when selecting your year-end date. Therefore, choosing a year-end date in the second half of the year (July 31 - November 30) can provide a limited tax planning opportunity. Through tax planning, you can declare a bonus in the corporation, attain the expense deduction, and pay no tax on that income during that year. In addition, it means you can delay the payment of that bonus until the following calendar year.

3. Business cycle

Your business cycle can help you decide when your year-end date should be. If you have natural processes for your business, select a year-end date that matches this. For instance, you can go with a food truck. They may open their season with a St. Patrick’s Day parade on March 17 each year. A smart choice for a year-end, in this case, might be October 31 or November 30.

Changing Your Fiscal Year-End Date

While choosing a different fiscal year-end date, check the date, as it will affect all other reporting obligations. For instance, if you register a business for the Goods and Services Tax and the Harmonized Sales Tax, the GST/HST reporting periods, filing, and remitting due dates will be impacted.

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“If you do not include the reasons for requesting the change, we may delay processing your request."- CRA.

We recommend you apply to the CRA if you want to change your fiscal year-end date. According to the CRA, corporations seeking to change a fiscal period should write a letter to their tax services office asking for approval and mentioning the reasons for the change.

You don't need the approval to change your fiscal year-end date if your corporation leaves Canada, if you become exempt or non-exempt from taxation. You also don't need permission if your corporation has been closed down, and you're filing its final return with an abbreviated fiscal period

Final Words!

Choosing a fiscal year-end is one of the first questions entrepreneurs are asked when incorporating their business. Some entrepreneurs opt for having their business tax year the same as the calendar year. In that case, they will decide the last day of December. You can either contact us in Mississauga or can you also Book Appointment with Yogi & Associates to discuss further questions about how to choose a Corporate Fiscal Year-end Date. 

Laila Batool

Executive Journalist

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