Change the Fiscal Year End of a Canadian Business

Change Your Fiscal Year-End for Sound Business Reasons

Tree lot owner carrying Christmas tree on shoulder
Seasonal businesses often have different fiscal year ends. Hero Images / Getty Images

Question: How do I change my fiscal year-end?

Answer:

Whether or not you can change your fiscal year end depends on how your business is structured. Sole proprietorships, members of a partnerships in which all the partners are individuals and corporations are the only forms of business that can have a fiscal year-end other than December 31st.

Establishing Fiscal Year-End When Starting a Business

If you're starting a business, the process for changing your fiscal year-end depends on how your business is structured:

Changing the Fiscal Year-End for an Established Business Requires Permission

    When Changes to Fiscal Year-End Do Not Require Permission

    In some circumstances changes to fiscal year-end do not require approval from the Canada Revenue Agency, such as when:

    • Changes to your fiscal year period that occur because the fiscal year period is "revised by operation of law". So, for instance, if your business's fiscal year period changes because a sole proprietor dies or sells the business, or because a partnership ceases to exist.
    • A corporation is being dissolved. (Note that a bankrupt corporation still must request approval to change its fiscal year-end.)
    • A corporation becomes exempt from tax.
    • A corporation relocates to another country (and will not be filing Canadian tax returns in future).
    • The business has been acquired and the fiscal year-end is being changed to match the fiscal year-end of the other company for ease of bookkeeping.

    Requests for Changes to Fiscal Year End Are Not Automatically Approved by the CRA

    The CRA will only approve changes to your fiscal year period that it considers to be made for "sound business reasons". Examples of acceptable business reasons include:

    • The business is seasonal so the company wishes to change the fiscal year-end date to coincide with the off-season period, thereby allowing more time for business planning, budgeting, and prepping tax returns and financial reports. Seasonal business typically reduce payroll during certain times of the year, so often choose fiscal year-end to finish when employees are laid off for the season. Examples of seasonal businesses where a different fiscal year-end might be beneficial include retail shops (who make most of their sales at Christmas), travel agencies, and construction and landscaping businesses. 
    • A corporation changes its fiscal period so that its fiscal year end date is the same as its parent company.

    The CRA's stated purpose for requiring approval of changes to fiscal periods is "to prevent taxpayers from rearranging their fiscal periods primarily to minimize taxes". If in the view of the CRA the request for change is to obtain a tax benefit or is being done for the personal convenience of the taxpayer the request will be denied.

     

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