How can you change a fiscal year?
If you are thinking about whether or not changing your fiscal year is worth it, you should be careful with it first. Because as soon as you have changed your financial year, a new change is no longer possible in view of the principle of balance sheet continuity . Furthermore, it is crucial whether you want to switch a different fiscal year to the calendar year, or a fiscal year that corresponds to the calendar year to the different alternative. The latter can only be implemented under consideration of certain conditions.
Such a crucial project should also be discussed comprehensively internally in advance. Only when the majority of all decision-making employees approve of the change to the financial year should you initiate the subsequent short financial year. It can also prove helpful to obtain the opinion of an expert or experienced tax advisor.
Tip : The calendar year usually applies to the financial year of an association. A different financial year can be made with the help of an amendment to the articles of association . This decision requires the consent of the tax authorities .
What reasons can you have for this?
In order for the tax office to approve the change in your previous financial year, it is initially up to you to underpin your project with organizational or operational reasons . If the change is understandable, nothing stands in the way of the changeover.
There are several possible reasons for the change in your financial year. The most common include:
Industry-specific core business
With the change in the financial year, typical seasonal developments can be clearly shown in the balance sheet. First and foremost, the type of activity is decisive when choosing the balance sheet date. For farms, for example, May 1st and July 1st are widely used as balance sheet dates.
Predictable low stock levels
If your company has annual maintenance and cleaning work on the machines, it can be worthwhile to adapt the annual financial statements to this fact. A reduced production process makes it much easier to carry out the inventory thanks to low stocks .
Clear illustration of your operational profitability
If you already generate a large part of your total annual income in the first third of the year, it can make sense to align the fiscal year accordingly. This enables you to depict your business success more realistically.
What are the consequences and what do you have to consider?
As already mentioned, when changing your financial year, it depends on whether you want to adapt it to the calendar year or set it individually . The adjustment to the calendar year is associated with significantly less effort, as you do not need a specific approval from the tax office.
The arbitrary determination of the financial year , however, requires the approval by the financial services authority. So that your chances are promising, your motives are primarily decisive.
Regardless of whether your project requires the approval of the tax office, a corresponding amendment to the articles of association is first required . In the case of a GmbH, for example, it is also necessary to change the partnership agreement, but this can only be implemented with a majority shareholder resolution. The result requires notarial certification . This resolution is fully legally effective upon entry in the commercial register . Retrospective changes to the financial year are usually prohibited.
Following the short financial year, the annual financial statements must henceforth be prepared depending on the newly defined financial year. In the case of stock corporations and GmbHs, there are now new dates for the corresponding meetings.
What does the financial year mean in a group?
If your company is an integral part of a group, the fiscal year must be the same as that of the parent company. Subsidiaries are exempt from this strict regulation. Since the affiliated companies are often located abroad, it can be useful to change your fiscal year for standardization.
In a nutshell: Frequently asked questions about the fiscal year
When is the end of a financial year?
Regardless of whether the financial year corresponds to the calendar year, its term is twelve months in any case . When the balance sheet date occurs, the deadline for the preparation of the annual financial statements comes into force and the new financial year begins.
What is the difference between a calendar year and a fiscal year?
The calendar year begins on January 1st and ends on December 31st. of the same year. The financial year, on the other hand, can, but does not have to, be identical to the calendar year. In both cases, the term is twelve months. The financial year is followed by the preparation of your company’s annual financial statements. It is now widely accepted that the financial year corresponds to the calendar year.
When is the different financial year?
Strictly speaking, a different financial year always arises when a company is founded. If you are aiming for a fiscal year that is identical to the calendar year, you will be able to change it after the short fiscal year.
What is the short financial year?
The transition between two business years of your company is referred to as the short financial year . A short financial year therefore only comes into force if the period of the existing financial year is to be changed. The terms “short financial year” and “short financial year” are to be used synonymously.
What does fiscal year mean?
The concept of the financial year has its origin in the Income Tax Act ( ESTG ), while the financial year goes back to the Commercial Code ( HGB ). Both terms describe the period in which you as an entrepreneur prepare the results of your business activity . The financial year amounts to a total of twelve months and ends on the balance sheet date.
In addition to fiscal year and fiscal year, these terms are most frequently used:
- Fiscal year
- Club year
- Financial year
At first glance, the financial year doesn’t seem to play a big role for your company. If the business year is different from the calendar year, this may result in attractive advantages for your company. It can therefore be worthwhile if you are already thinking about your financial year when you start a new business . Since the timing of determining your fiscal year turns out to be fundamental, you should make this decision carefully.