Fiscal year

What it means

A fiscal year is a twelve-month accounting period that does not follow the calendar. Companies adopt one when their season or their parent dictates a different closing rhythm.

The switch must be notified to the tax office in advance, and a transitional period arises between the two, with its own return and financial statements.

A fiscal year is just one form of the accounting period: what changes is the date the statements are prepared to, not the accounting rules. For income tax the fiscal year also becomes the tax period, but not for VAT: VAT returns are still filed monthly or quarterly by the calendar.

How it works in practice

The usual reason is consolidation into a group with a March or June year end. The second is strong seasonality: closing in the quiet season is more accurate and cheaper.

The change moves every deadline: the return, advances, closing the books, filing with the register. The whole compliance calendar has to be rewritten, or something goes in on the old rhythm.

Payroll does not follow the fiscal year. The annual reconciliation of advances, the annual report and the yearly contribution caps all stay on the calendar year, so a company with a fiscal year effectively has two closes: payroll in December and accounts at the end of its own year. We plan the work around that from the start.

What to watch out for

The transitional period is usually shorter than a year, and rates, thresholds and depreciation are apportioned within it. That is where most errors arise and carry into the first full fiscal year.

Some obligations stay on the calendar year even with a fiscal year, such as motor vehicle tax or local taxes. Move everything to the new rhythm after the switch and those returns go in late, with a penalty or late-payment interest, even though the tax itself was worked out correctly.