Choosing a Financial Year End: 31 March, 31 December, or Something Else?

At a glance

The most common confusion: the year end and the incorporation anniversary are two different things. The 42-day deadline for the annual return NAR1 runs from the incorporation date and has nothing to do with your year end — two separate deadlines to track.

What does the year end actually affect?

The year end (the Companies Ordinance calls it the “accounting reference date”) decides three things.

1. Which filing category you are in. The IRD divides year ends into three: N for 1 April to 30 November, D for 1 December to 31 December, M for 1 January to 31 March.

2. How much time you have to file. Returns are issued on the first working day of April each year and are normally due within one month of issue. Appointing a tax representative brings the block extension: D to 15 August the same year, M to 15 November, N with the least room.

3. When your busiest period falls. After the year end there is the stock count, closing the books, reconciliation, producing statements, and then handing everything to the auditor before the return can go in — the date you choose is the start of your busiest stretch each year.

Note that the specific block extension dates are set out in the IRD’s annual circular letter to tax representatives; separately, from April 2026 tax representatives must submit block extension applications electronically through the Tax Representatives’ Portal (TRP).

31 March, 31 December, or another date?

31 March (code M) is the most common choice for Hong Kong SMEs, for practical reasons: it gives the widest extension, out to 15 November, and it aligns with the government’s financial year and the year of assessment for salaries tax, which makes payroll and MPF reconciliation easier. The cost is that a great many companies choose it, so accounting firms and auditors are at their busiest then and your file queues.

31 December (code D) suits a parent company or group reporting on the calendar year, or where your customers and suppliers all use it, so group consolidation does not need two timetables. The cost is that the extension only runs to 15 August — three months less than M.

Another date (code N) is generally not advisable unless your business has a pronounced season. If December to January is your peak, a 30 June year end keeps the closing work away from it — at the cost of the least extension room.

How should a new company set its first year end?

A new company does not have to file straight away — the IRD usually issues the first profits tax return about 18 months after the business commences or the company is incorporated.

That 18 months lines up exactly with the Ordinance’s 18-month cap on an accounting reference period, so in practice the most common approach in year one is to run the first accounting period long and do a single set of accounts, saving one round of audit and administration. A company incorporated in October 2026 choosing 31 March 2028 as its first year end has an 18-month first period. Exactly how far you can safely stretch it should be counted out precisely with your company secretary. On preparing for the first return, see filing your first tax return.

If the parent is overseas, should you match its year end?

If your Hong Kong company is a subsidiary of an overseas group, matching the parent’s year end is usually the most convenient — consolidation does not need two sets. The Ordinance specifically accommodates this: even within 5 years of a previous extension, a change is still permitted where it aligns with a holding company’s accounting reference date.

Conversely, if the parent uses 31 December and you want code M’s longer extension, weigh it up: group consolidation convenience on one side, three extra months of preparation time on the other. There is no standard answer. To compare setting up a branch or a subsidiary, see branch versus subsidiary.

Can you change it if you chose wrong?

Yes, but there are rules. Directors may change the accounting reference date by resolution under s.371 of the Companies Ordinance, subject to two gates: the accounting reference period cannot be extended beyond 18 months; and no further change is permitted within 5 years of a previous extension, unless it aligns with a holding company’s accounting reference date or is approved by ordinary resolution of the members.

On filing, what the Ordinance expressly requires is for public companies and companies limited by guarantee — their directors specifying a new accounting reference date under s.371(1) must deliver form NAC4, “Notice of Change of Accounting Reference Date”, to the Registrar within 15 days of the directors’ resolution, with both the resolution and the notice stating whether the accounting reference period is shortened or extended. For a private company, confirm the specific filing requirement with your company secretary before filing.

The real difficulty is not the form. It is the aftermath: the year you change produces an accounting period that is not 12 months, which needs special handling in the books, the audit and the return, and the auditor’s fee may differ. Better to choose correctly at the start.

Once the year end is set, what should you prepare?

What actually needs doing is monthly bookkeeping: bank reconciliation, filing documents, keeping receivables and payables current. Do that and the year end is a matter of closing the books, not searching through boxes for invoices. How the whole audit process runs: Hong Kong audit requirements; and if you have just incorporated there are other deadlines to track — see what to do after incorporation.

We are a licensed Hong Kong trust or company service provider (TCSP), and can keep your books monthly, have the full set ready at the year end, and then handle the profits tax return and extension arrangements.

Want someone tracking it from bookkeeping through to filing? Talk to us, or get started.

The categories, dates and extension arrangements described are as published by the IRD and the Companies Registry — the block extension dates are updated by the IRD’s annual circular letter, so the current year’s publication governs. This is general information, not professional advice; individual situations warrant advice from a professional.