What is it?

Think of a year end date as the end of a chapter in a book. You need to pick a 12 month period in which your company operates, reports financials and files their taxes, then your company flips the page and resets the clock for the next fiscal period.

When is it?

It’s always the final day of the month you choose, as the next day should be the first of the month like a brand new chapter in a book, Day 1 again. It does not need to be 12 months from when you incorporate as the first year is usually a shorter year since you are declaring your year end in the first year.

Example, if you incorporate on March 12 and declare December 31 as your year end, then your first year of operations will be only 294 days (March 12 to December 31). Then next year, your accounting books will begin on January 1 to December 31, a clean 12 month period going forward.

How do I pick it?

86% of small businesses do in Canada match it to the calendar year (January 1 to December 31) due to it’s simplicity and ease of filing with their personal taxes.

However, if your business is a bit more complex, selecting a specific fiscal year end is key for operational efficiency and tax benefits. Choosing a year-end that aligns with business lows can minimize workload and optimize tax positions.

For instance, setting a year-end when inventory is low simplifies counting tasks. Avoid busy seasons to prevent operational stress. December earners might avoid a December 31 year-end, while investment-heavy companies might prefer it for simpler tax reporting.

Strategic fiscal year-end timing can defer taxes, allowing for bonus deductions if declared and payable within 180 days of the fiscal year-end, offering potential tax savings. However, this requires careful planning and consultation with tax professionals.

Sticking with your chosen fiscal year-end is generally required, with changes needing Canada Revenue Agency approval for legitimate business reasons, not just tax avoidance.

Thankfully we are fully staffed with professional CPAs that will help you decide on the most operational efficient year end date. Sign up today!