First-Year Bookkeeping and Year-End: Choosing Your Fiscal Year

Choosing your year-end, financial statement requirements, T2 deadlines

Scott Tang, CPAUpdated 2026-11-032026 rules6 min read

In China, a company's fiscal year always runs from January 1 to December 31. A Canadian corporation can choose its own fiscal year-end — any date will do. But once you choose it, the deadlines for your T2, HST and annual return all follow from it, and changing it later requires the CRA's approval. So it is worth thinking about when you incorporate.

Any date

Your year-end can be any day of the year, not necessarily December 31

53 weeks

The longest any taxation year can be, including the first

6 years

How long books and records generally have to be kept

Choosing your year-end

Match the parent
If the parent has a December 31 year-end and prepares consolidated financial statements, choosing December 31 for the subsidiary too is the simplest option: both sets of books close on the same day.
Avoid your peak season
If your business has a clear peak season, put the year-end in a quieter period. The inventory count and closing the books are both a little easier.
A longer first year
A taxation year can be up to 53 weeks long, and the first year is no exception. For example, if you incorporate in November, you can set the year-end at the end of October the following year, which gives you a first year of nearly 12 months.
Changes need CRA approval
Once set, the year-end can't be changed freely. You have to write to the CRA explaining your reasons and get its approval, so choose carefully from the start.

Once the year-end is set, these deadlines follow

Item	When
Corporate income tax paid in full	Within 2 months after year-end (a foreign-controlled subsidiary generally does not get the 3 months available to a CCPC)
T2 corporation income tax return	Within 6 months after year-end
Ontario annual return	Within 6 months after year-end
Annual HST return	Within 3 months after year-end (for annual filers)
Year-end bonuses	Generally deductible in that year if the obligation to pay was fixed during the year (by a resolution or contract), the amount is reasonable, and the bonus is actually paid within 180 days after year-end

Where to start your first-year books

1
Open a bank account
Keep the company's money separate from the parent's and from personal money
2
Record start-up costs
Incorporation fees, legal fees and costs paid on the company's behalf before incorporation; separate what can be deducted right away from what must be capitalized
3
Record capital and loans
Record the share capital the parent invests separately from the money it lends the subsidiary
4
Monthly bookkeeping
Record revenue, expenses and HST input tax credits separately
5
Year-end statements
Prepare the balance sheet and income statement, then the T2

A few things that most often go wrong in the first year:

Foreign currency
Amounts the parent pays in RMB or US dollars are recorded in Canadian dollars at that day's exchange rate. Loans are recorded in the currency set out in the loan agreement; if that is a foreign currency, you also need to calculate the foreign exchange gain or loss at year-end.
Dealings with the parent
Expenses the parent pays on the subsidiary's behalf, money it lends the subsidiary, and share capital: be clear which is which, and have an agreement and supporting documents for each.
Receipts
Every expense needs an invoice or receipt. To claim HST input tax credits, the invoice must show the supplier's GST/HST number.
Where the books are kept
As a rule, books and records must be kept in Canada. To keep them outside Canada (including on the parent's systems or on cloud servers abroad), you first need the CRA's written permission and must meet its conditions. The same goes for electronic records: keeping them on a server abroad that can be accessed from Canada does not count as keeping them in Canada.

Do you need an audit?

For an Ontario corporation that is not an offering corporation, or a federal corporation that is not a distributing corporation, if all shareholders (including those without voting rights) consent in writing, the corporation can decide each year not to have an audit. For tax filing itself, what you need is financial information, not necessarily a formal compilation report. Whether you need a compilation, a review or an audit depends on what your bank, your parent company and you yourself need. But first ask the parent: Do group consolidation, the parent's auditor or a bank loan require the subsidiary to produce a review or audit report? If so, keep the books to that standard from the first year. If the same firm does both the bookkeeping and the audit, its independence must also be assessed separately.

How Sheng Qian CPA can help

Year-end set at incorporation
Incorporation through EasyU Incorporation (Express incorporation available), with the year-end chosen together with the parent's reporting and your future tax filings in mind.
Bookkeeping on EasyU
Reviewed by a CPA, with foreign currency, dealings with the parent and HST input tax credits recorded separately.
One team for year-end and T2
Financial information for the tax return, a compilation report where needed, the T2 and the Ontario annual return, all done together (for prices, see "What Sheng Qian CPA Can Do for Foreign Companies: Services from Set-Up to Day-to-Day Operations" in this series). If the parent needs a review or audit report, we agree on the standard in advance.

Sources

CRA: Determining your corporation's tax year · Corporate income tax payments · Reporting requirements and deadlines (GST/HST)
CRA: Where to keep your records, how long, and how to request permission · Income Tax Act: s. 78 unpaid remuneration
Ontario: Corporations Information Act annual return Q&A · Business Corporations Act (OBCA)

Disclaimer

This article is general information only and is not tax or accounting advice. Every company's situation is different; please consult a CPA about your specific arrangements. Service fees are as set out in our written quote.