Determining the Financial Year End
The Financial Year-End (FYE) refers to the final day of a company’s accounting period, marking the completion of a financial cycle for tax and reporting purposes. Setting your FYE is an important step when running a business in Malaysia, as it affects tax filings, financial reporting, and compliance requirements. Read on to know more about how to determine a financial year in Malaysia.
Financial Year-End Requirements Under the Companies Act 2016
Every company is obliged to prepare financial statements for a financial period not more than 18 months from the date of incorporation and subsequently within 6 months of each financial year end and submit the financial statements with the Companies Commission of Malaysia and the Inland Revenue Board of Malaysia. A company can fully maximise its first accounting period to 18 months from the date of incorporation for the preparation of its first financial statements.
However, the majority of companies fix their financial year/period to end as on either the last day of a calendar year (December 31) or on the last day of any of the quarter (March 31, June 30 or September 30).
How to Choose a Financial Year-End in Malaysia
The financial year-end for a newly set up company can be any date, so long as the financial period is within 18 months of the company’s incorporation date.
We recommend our clients to set their company’s first financial year end on or before the twelfth (12th) month from the incorporation date. This is to take into consideration the time that may be required by the directors to finalize and prepare the company’s account and also to allow sufficient time for the auditor to prepare the company’s audited financial statements, for submission to the Companies Commission of Malaysia. Companies may also want to avoid fixing financial year end, which ends during peak periods (i.e. March, June, September & December).
Key Factors to Take into Consideration when Choosing the Financial Year End
Business Cycle
The financial year end doesn’t have to coincide with of your incorporation date, nor does it need to coincide with the end of the calendar year. The ideal year-end has more to do with your business cycles, which vary from business to business.
Businesses that manage a lot of inventory may consider choosing a year-end that corresponds with the end of the busy season and presumably, a time when inventory is at its lowest. This means less inventory has to be counted, which decreases costs and increases accuracy. Furthermore, a quiet time of the year makes it easier to close the books as there are fewer transactions in process and more time available from support staff.
Taxation Period
Generally, the basis period (i.e. taxation period) of a company is the same as the company’s accounting period. The first accounting period is the basis period for a year of assessment when the accounts are closed. It would be the first year of assessment for the entity. Please refer to PR No.8/2014 Basis Period Of A Company, Limited Liability Partnership, Trust Body And Co-operative Society for further details.
The sooner your financial year ends, the sooner you have to file and pay your corporate income taxes. Selecting a fiscal year-end that is far away enough will allow you to file and pay the corporate tax later.
Synchronize the Financial Year with Its Holding Company
Section 247 of the CA 2016 generally provides that the financial year of a subsidiary company must coincide with its holding company. A holding company that is not a foreign company shall take the necessary steps to ensure that within two (2) years after any corporation becomes a subsidiary of the holding company, the financial year of that corporation coincides with its financial year. Notwithstanding, a holding company may apply in writing to the Registrar under Section 247(3) of CA 2016 if there is good reason for the subsidiary to continue having a different financial year.
Other Considerations
Some corporations may have their fiscal year end determined by other factors such as a franchisee agreement, joint venture agreement and etc. It’s a decision that deserves some thought and planning to make the financial year-end as easy as possible to execute, as cost-effective as possible for your business and as tax advantageous as possible to both you and your business.
Change of Financial Year-End
Businesses may change their financial year-end for reasons like aligning with a group structure, managing deadlines, or optimizing tax planning.
To proceed, companies must:
✅ Work with the company secretary to plan deadlines, pass a resolution, and apply for an extension with SSM if needed.
✅ Notify the IRB via Form CP204B within the required timeframe to avoid penalties.
Choosing the right financial year-end is a crucial decision that impacts your business operations, taxation, and compliance under the Companies Act 2016. It affects financial reporting, tax planning, and alignment with business cycles or group structures.
Since non-compliance can result in fines, penalties, or imprisonment, careful planning is essential. Selecting a practical and cost-effective financial year-end ensures smoother processes and regulatory compliance.
If you have any questions or need assistance, feel free to contact us—our team is ready to help!
