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What is a fiscal year-end?
A fiscal year-end is the end date of a corporation’s financial year. It is the closing date for their annual accounting records.
Unlike personal tax returns which have a calendar year-end of December 31st, corporations can choose when their fiscal year will end. This date then becomes the last day of their financial year, for the purposes of filing financial statements and tax returns.
When is the First Fiscal Year-End?
For newly incorporated companies in Canada, the first fiscal year-end must be within 53 weeks (371 days) following the incorporation date. The date is formally declared on the corporation’s first T2 tax return filed with the Canada Revenue Agency after incorporation.
Your fiscal year-end does not need to be known as of the date of incorporation. It’s something that you can decide at a later date. Just remember that the latest the first fiscal year-end can be is 53 weeks following the date of incorporation.
Why Choose a Non-Calendar Year-End?
While December 31st is common, many corporations pick a different fiscal year-end date for reasons like:
- Allowing accountants to prepare year-end finances at a time when they are less business with personal tax filings
- Avoiding a stub year-end if the corporation is incorporated later in the year (for example, a corporation with a December 31st year-end that was incorporated on November 1st would require its first tax return to be based on the short period of November 1st to December 31st)
- Selecting a fiscal year-end during their slower business period to allow time to focus on taxes
The ideal fiscal year-end depends on each company’s unique circumstances.
Choosing the Right Year-End for Your Corporation
Determining the most appropriate fiscal year-end for tax and accounting purposes can be complex. It’s best to consult with your corporation’s accountant when making this decision.
They can advise you on the pros and cons of different year-ends based on your business operations, industry, tax situation, and other important factors.
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