Fiscal Year-End 2022: Essential Guidelines for You

by | Jun 2, 2022

The fiscal year-end date is the most important decision you have to make when incorporating your business in Canada. Your business’s fiscal year-end is also known as the tax year-end or financial year of your business. So, if you just incorporated your business and want to get information regarding how to choose a fiscal year-end, this article will help you answer these questions. It will also explain some other factors such as tax planning and your business cycle that may affect your business matters while choosing your year-end date.

If you are looking for an expert accountant in Mississauga, contact Yogi & Associates today. Our team of certified professionals is ready to serve you. We can help you with any of your accounting needs and will guide you on how to choose a fiscal year-end in Canada. So without any delay, let’s start our discussion!

1. What is Fiscal Year-End?

The fiscal year-end is usually a twelve-month period. However, this period may be shorter for businesses in their first year. Fiscal year-end is also known as the tax year-end or fiscal period/year of your business.  fiscal period is a time between the day your company starts its business year and the day it ends its business year.

How to choose a fiscal year-end?

2. How to choose a Fiscal year-end?

The fiscal year-end for your company can be any date within 53 weeks from your incorporation date. In addition, the fiscal year-end will be set once you file your first T2 corporate tax return. For more information about T4 slips, please review our article A Step-by-Step Guide to T4 Forms. 

So, in order to avoid penalties, the T2 income tax return must be filed within three months after your business’s fiscal year-end begins. So it’s better to set your fiscal year-end at the time of incorporating the business. This helps you to stay calm about how to choose a fiscal year-end for your company.

3. 3 factors to consider when selecting year-end date

Your incorporation date

If you’re a new corporation owner, you may want to consider pushing your first year-end date as far into the future as possible. The main reason you might want to do this is because year-end come at a cost. If you can push that cost further into the future, you can hang on to your cash for longer.

For Example: Your first fiscal period can last up to 53 weeks/372 days. Let’s suppose you incorporated on June 25, 2022. It means you are free to choose to your first year-end date June 30, 2023, thus giving you the longest first fiscal period possible. The result is that you have successfully postponed your first year’s tax amount owing. 

Therefore, your due date for filing would be September 30, 2022 – giving you more than 18 months from the time you are incorporated to the time you have to file your taxes and pay your accountant’s bill.

Note! For Canadian-controlled private corporations (CCPCs), taxes for this period (above-mentioned example) are due three months after your year-end date, giving you over 15 months from your incorporation to your corporate tax due date.

Tax planning

You should know that tax planning plays a crucial role in 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.

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

Business cycle

It is the most important factor to consider while choosing a year-end date. Your business cycle can help you decide when your year-end date should be. 

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.

How to choose a fiscal year-end?

4. How to Change 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 (GST/HST) reporting periods, filing, and remitting due dates will be impacted.

If you want to change your fiscal year-end date, it is best for you to apply to the Canada Revenue Agency. 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.

We are here For You!

Whether you are an experienced entrepreneur in Mississauga or just starting out, don’t set your year-end date haphazardly. It is an important decision that should be made with careful consideration. All in all, there are several factors to consider when thinking about how to choose a fiscal year-end. Such as tax savings and tax planning considerations and your corporation’s date (when your company got incorporated)

You can choose the date that best aligns with your business strategy, tax planning, and other organizational goals. We hope that this article has helped to understand what is fiscal year-end in Canada and how you can choose it. For more information on how to choose the best fiscal year-end for your business, feel free to CALL US TODAY. Or visit our accounting firm in Mississauga. We’d love to talk with you about your accounting and bookkeeping needs so that we can figure out the best way to work together as well!