How to Change the Fiscal Year-End of a Canadian Business – Part 1
Need to change the fiscal year-end of a Canadian business? In this 2-part series we examine what you should know before you get started.
Fiscal periods remain the same from year to year, unless they need to be changed. How your fiscal year-end is set up and whether or not you can change it is based on your business structure.
When you set up your business, you must decide which business structure it falls under. Business structures have a big effect on how you report your income, what type of tax returns you have to file, and much more.
According to the Canadian Revenue Agency (CRA), business structures can be set up as any of the following:
Sole Proprietorship – an unincorporated business that is owned by one individual. The owner of the business takes on all responsibility for decisions, receives all profits (or losses), and does not have separate legal status from the business.
Partnership – an association or relationship between two or more individuals, corporations, trusts, or partnerships that join together to carry on a trade or business. Each partner contributes money, labour, property, or skills and is entitled to a share of the profits or losses of the business.
Corporation – a corporation is its own legal entity. Any contracts or property owned in its name is separate from the individual owners. Money, property, or services are contributed to the corporation in exchange for shares. The owners of the shares are called shareholders.
Learn more about business structures and how to set up your fiscal period from the CRA.
How do I Make the Change?
In order to change a fiscal year-end, you must write a letter explaining why you need the change to your local tax services office and ask for approval.
However, according to the CRA, there are a few situations in which you do not need approval to change the fiscal period. These situations include:
- The corporation has wound-up and you are filing its final return with an abbreviated fiscal period
- The corporation has to end its tax year at a certain time because it is emigrating to another country, becoming exempt from tax, or ceasing to be exempt from tax
- A person or a group of persons acquired control of the corporation under subsection 249(4)
Note: Corporations that have gone bankrupt still need to get approval from the CRA to change their fiscal period.
Have more questions about how to change the fiscal year-end of a Canadian business? Read more in part 2 of our series on how to change the fiscal year end of a Canadian business:
- Family Successions: What Bill C208 Means for Small Businesses in Canada - February 16, 2022
- Best Practices & Tax Tips for the Self-Employed in Canada - February 16, 2022
- How to Reduce Tax Liability When Planning a Family Succession for Your Business - February 15, 2022