A fiscal year is a 12-month period. It can also be called a tax year or financial year.
Unlike the calendar year, which runs from January 1 to December 31, a fiscal year can start and end at any point. Some countries have fiscal years that follow the calendar year—others have fiscal years that run from, for example, June 1 to May 31 or October 1 to September 30.
Fiscal years can even start in the middle of a month.
Fiscal years are usually named based on the year they start. If the fiscal year in your country runs from October 1 2024 to September 30 2025, you would refer to it as FY24. This simplifies the process of tracking and referring to specific financial periods, both internally and externally.
Reporting and paying tax
The tax authorities set specific deadlines for paying consumption tax, company tax, or to submit the annual report, which is an overview of the financial situation of your business.
The annual report is due at the end of the fiscal year, and there is usually also a deadline to pay any outstanding consumption tax and company tax that you owe for the past fiscal year.
See also: Financial year per country
Why choose a different fiscal year
If the tax authorities allow it, there are some cases where businesses can choose to use a different tax year from the tax authorities. This has to be grounded in specific operational patterns, revenue cycles, or the nature of their industry.
Setting a different fiscal year would not just simplify the bookkeeping and help with budgeting and financial planning, it would also give a more accurate overview of the business’ financial performance.
For example, a retail business which experiences a sales peak during the holiday season might prefer a fiscal year that includes this busy period at the end, for example by having a fiscal year that ends on January 31. That means holiday sales, returns and year-end inventory adjustments will be included in the same fiscal year. A bonus is that they’ll not have to spend time on financial accounting and reporting during the busy holiday seasons.
Similarly, a business in a seasonal industry like tourism or agriculture may opt for a fiscal year that better reflects its revenue cycles and expense patterns, which peak during the summer months.
An educational institution might prefer a fiscal year that runs from summer to summer, to align with the academic year and tuition payments. Additionally, the university is less busy during the summer, so they’ll have more time to compile reports and complete bookkeeping.