In financially uncertain times entrepreneurs often choose to change / extend the financial year of their company. Changing a financial year can be a solution to optimize loss relief and to be able to depreciate more on investments.
A financial year
A financial year is the period over which the financial report is presented. This report consists of drawing up the annual accounts, the management report and filing the corporate tax.
Based on article 2:10a of the Dutch Civil Code, a financial year is equal to a calendar year, unless another financial year is stated in the articles of association. When the financial year has ended, the company must prepare its annual accounts within five months. Corporation tax must be paid on the profit of the financial year.
If a company has a ‘split’ financial year, e.g. running from the 1st day of July to the 30th day of June, and you want to change the financial year into a calendar year, the current financial year will be longer. These additional six months can be added to the current financial year.
By extending the current financial year, a company can optimally offset its losses, depreciate the investments and also postpone the payment of corporation tax, which can help in financially uncertain times.
Each company has the opportunity to change its financial year, under the conditions that the company closes its financial year regularly. For this purpose the company only needs to amend its articles of association.
If you have any questions regarding the extension of your financial year, please don’t hesitate to let us know.