Happy New (Financial) Year

Each entity must, for tax and other reasons, report its results on an annual basis. For individuals this “year” normally ends on 28 February, which is the tax period prescribed in South Africa.

With a few special exceptions, other entities may generally choose their financial (also called fiscal) year-ends.  For example, according to section 27(1) of the Companies Act, 71 of 2008, a company must have a financial year ending on a date set out in the company’s Notice of Incorporation. Each year a company must prepare annual financial statements for their 12-month trading period and a company’s tax year-end usually corresponds with its annual accounting period.

Choosing a year-end

If you are part of a group you normally don’t have a choice as groups have to report at the same date.  But if you are starting your own entity, the choice of year-end should be determined by the business cycle of the company. It doesn’t make sense to report results in the middle of your busy season. If your year-end is at the end of the busy season the annual financial statements will reflect the efforts of the whole year, and theoretically your inventory and/or work in progress should also be at its lowest point which will make that part of the reporting easier and more accurate.

Another important consideration is the availability of professional advisors, like an accounting or auditing firm. You may even find that you can negotiate discounts if the year-end is outside the normal busy season.

Income tax is another big factor. Because individual year-ends are in February, the company’s choice of year-end may have an impact on when they pay tax on bonuses, etc.

Can you change the year-end if circumstances change?

Depending on the type of legal entity, you may be able to change the year-end. For example in the case of a company, subsection 27(4) allows the board of directors to change the financial year end at any time, by filing a notice of that change, but

  1. It may not do so more than once during any financial year;
  2. The newly established financial year end must be later than the date on which the notice is filed; and
  3. The date as changed may not result in a financial year ending more than 15 months after the end of the preceding financial year.


A change from February to June would therefore imply that financial statements still have to be prepared for the year until February 2016, then for the four months until June 2016 and every year thereafter.

Company secretarial

A change of year-end requires the Companies and Intellectual Properties Commission (CIPC), Form CoR25 (Notice of Change of Financial Year End) to be completed. A filing fee of R100 is payable. The form must be filed manually or electronically with the CIPC before the last day of the new proposed financial year-end and signed by an active director, company secretary or designated authorised personnel of the company.


If the financial year-end changes, the tax year should also change. If the company was paying provisional tax, however, the payments must remain unchanged until approval is granted by the Commissioner to change its financial year end.

Audit and accounting

The change in the financial year end of a company should be reviewed to determine how significant the financial results would be impacted. The financial results should be presented to motivate and explain the change in year-ends. The period to be taken into account when preparing the actual financial statements should be the new cycle (which is not more than 15 months).


The reasons for changing a company’s annual financial year end may be to utilise tax deferral opportunities, negotiate better audit fees with external auditors during off peak seasons, better reflect the business cycle or in the case of a group of companies, to match the parent’s annual financial year end. These changes in a company’s financial year end require compliance with certain regulatory requirements mentioned above, such as the Companies Act, CIPC and other relevant requirements including payments of certain levies and penalties, in the case of non-compliance. Therefore, before changing a company’s annual financial year end, the company needs to gain an understanding of the legislation governing the year end changes in the tax, secretarial, audit and accounting fields. Please contact your RSM engagement partner who will be happy to advise you.

Henk Heymans     Kuda Mukwata
Head of Audit, Johannesburg     Intermediate Trainee Accountant, Johannesburg 


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