Determination of Company’s Financial Year End

The financial year is a period in which any financial statements of a company is made up, whether that period is a year or not. The financial year is referring to a company’s accounting period, a range of time which profit & loss account and balance sheet are makeup. The decision to determine your company’s first financial year-end or any change of financial year end thereafter is solely at the discretion of your company.

However, your Company is required to prepare its financial statements within 18 months from the date of its incorporation and subsequently 6 months of its financial year. Audited financial statements are then circulated to shareholders, directors, auditor and debenture holders (if any). The audited financial statements shall be approved by the board of directors before circulation.

Your company should not fix its first accounting period for exactly 18 months or more. It is advisable that the first financial year-end be fixed few months before the deadline of 18 months to allow some time for the auditor to prepare the audited financial statements.

Subsequently, your company is required to lodge its audited financial statements and reports to Companies Commission of Malaysia (SSM) within 30 days from audited financial statements and reports are circulated to shareholders. Hence it advisable for you to liaise with your auditors to finalise the audited financial statements earlier so that it could be made available for lodgement to SSM before the deadline.

In summary, the financial year end for a newly set up company can be any date so long as it is within 18 months from the company’s incorporation date.

What to consider when choosing a Financial Year End of a company

Inventory

The company may consider closing its financial year end at the time when inventory is at its lowest. This can help to reduce and save time for counting inventory, decrease cost, increase accuracy and fewer audit queries from the auditor.

Tax Period

Generally, the tax period of a company is same as the Company’s accounting period that has been fixed. To file and pay your corporate income tax is very much depend on your company’s financial year-end, the fastest the closing of financial year end the sooner you have to pay your corporate income taxes.

Subsidiary’s Financial Year End

A subsidiary company shall coincide its financial year with its holding company. A holding company that is not a foreign company shall ensure that within two (2) years after any corporation becomes a subsidiary of the holding company, the financial year of that subsidiary must coincide with the holding company’s financial year. Nevertheless, a holding company may apply in writing to the Registrar if there is a good reason for the subsidiary to continue having a different financial year.

Other Considerations

There are other considerations you may want to take into consideration to choose your company fiscal year end such as you are operating a franchising businesses with franchisor company or enter a joint venture agreement with other party or establishing a closely related business with a business partner for geographical wise etc. A well planned financial year end will help you to utilize tax incentives and save you more cost after all having a business is to make maximize your income.

Should you need further clarification in determining your company’s financial year-end, please contact us or email us at enquiry@comsetup.com.my