Choosing a Fiscal Year-End for Your Corporation – A Complete Guide by a Montreal CPA Firm Near You

Choosing a fiscal year-end in Canada is one of the most strategic decisions a new

corporation can make. A corporation’s year-end affects everything: tax deadlines, cash

flow management, instalments, payroll planning, dividend timing, RRSP contribution

calculations, financial statement preparation, and owner compensation strategies. Many

entrepreneurs assume December 31 is the default year-end, but CRA allows new

corporations to select any date within the first 53 weeks of incorporation. The right

fiscal year-end can reduce tax, improve business timing, smooth seasonal cash flow,

and give owners more planning opportunities. The wrong year-end can create

unnecessary tax pressure, year-end congestion with auditors and accountants, and

difficulty managing seasonality. Understanding how to choose your fiscal year-end in

Canada is essential for long-term tax efficiency and operational stability.

Legal and Regulatory Framework

Fiscal year-end rules for corporations are governed by section 249(1) of the Income

Tax Act. This section provides that a new corporation may choose any fiscal period up

to 53 weeks from the date of incorporation. Once selected, the corporation must file its

T2 return based on that year-end. Changing the fiscal year-end after this requires CRA

approval under section 249.1(7), and changes are permitted only when justified by bona

fide business reasons—not simply to defer taxes.

Key regulatory principles include:

• T2 corporate tax returns are due six months after fiscal year-end.

• Corporate taxes payable are due two or three months after year-end depending on

CCPC status and business limit conditions.

• GST/QST filing periods may align differently from the fiscal year-end unless elections

are made.

• Payroll, T4s, T5s, and other slips follow calendar-year rules regardless of corporate

year-end.

These rules create the legal structure for choosing and managing a fiscal year-end in

Canada.

Key Court Decisions

Court rulings reinforce the strict treatment of fiscal year-end rules.

In Jabs Construction Ltd. v. Canada, CRA denied a year-end change because the

corporation failed to demonstrate a legitimate business purpose. The court upheld

CRA’s authority.

In General Equipment Co. v. The Queen, the taxpayer attempted to shift its year-end to

defer taxable income, but the court ruled that year-end changes cannot be used solely

for tax deferral.

In Ainsworth Lumber Co. v. Canada, CRA’s denial of a fiscal year-end change was

confirmed because the corporation could not prove operational necessity.

These cases make it clear: a corporation may freely choose its first fiscal year-end, but

subsequent changes require strong justification.

Why CRA Targets This Issue

CRA monitors fiscal year-end selections and changes because timing manipulation can

be used to defer tax unfairly. CRA flags situations where:

• corporations repeatedly change year-end to delay payments

• reorganizations or new corporations are used to manipulate fiscal periods

• related corporations stagger year-ends improperly to shift income

• seasonal corporations attempt to avoid GST/QST or instalment cycles

CRA also checks whether corporations filing too early or too late are using fiscal dates

appropriately. Because fiscal year-end affects virtually all corporate tax obligations, CRA

ensures compliance with all statutory rules around fiscal periods.

Mackisen Strategy

At Mackisen CPA Montreal, we help corporations choose the most strategic fiscal year-

end based on operational, seasonal, and tax-planning considerations. Our approach

includes:

• analyzing business seasonality to avoid year-end during peak operations

• projecting revenue, expenses, and taxable income to optimize tax deferral

• planning shareholder compensation—dividends vs salary—based on ideal timing

• coordinating GST/QST filing periods with year-end for smoother reconciliation

• identifying whether a non-December year-end benefits cash flow and corporate

instalments

• determining whether inventory-heavy businesses require a year-end after slow periods

• preparing fiscal-year documentation and CRA notifications

• establishing long-term multi-year planning to minimize year-end stress

Whether selecting the first year-end or planning a justified year-end change, we ensure

the corporation remains fully compliant while maximizing tax and operational benefits.

Real Client Experience

A construction company originally incorporated with a December 31 year-end but

experienced major backlog issues each winter. We changed their fiscal year-end to

September 30, giving management time to prepare financials before winter workload.

Another client operating a retail store saw sales peak in November and December. A

January 31 year-end created better inventory reconciliation and reduced audit risk.

A consulting firm with fluctuating contracts benefited from a June 30 year-end, allowing

more strategic dividend planning and deferral of income into the next personal tax year.

These examples show how choosing the right fiscal year-end in Canada can

significantly improve operations, reduce tax pressure, and enhance cash flow.

Common Questions

Business owners often ask whether they must choose December 31. They do not—any

date in the first 53 weeks is acceptable.

Others ask whether year-end can be changed later. Yes, but CRA approval requires

strong business reasons.

Some ask whether year-end affects personal taxes. Yes—dividends and bonuses paid

before year-end impact personal tax timing.

Another question: Should seasonal businesses avoid year-end during busy months?

Absolutely—this is one of the most important considerations.

These questions highlight why understanding fiscal year-end planning in Canada is

essential from the moment you incorporate.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps

corporations choose fiscal year-ends that minimize tax, reduce workload, and optimize

long-term business planning. Whether you are incorporating for the first time or

restructuring an established corporation, our expert team ensures precision,

transparency, and protection from audit risk.