An overview of the financial year-end in Indonesia.

This is an overview of the financial year-end in Indonesia.

When companies are newly incorporated in Indonesia, they need to determine a financial year-end, and there are certain criteria that companies will need to follow.

Let’s start.

What is the financial year-end?

The financial year-end is a period of 12 consecutive months that a company uses for accounting and tax purposes. It coincides with the calendar year, which starts on 1 January and ends on 31 December.

However, companies are allowed to have a financial year-end different from the calendar year.

Determining the financial year-end

When a company chooses its financial year-end, there are three main factors that should be considered:

1. Companies should avoid choosing a financial year-end that coincides with the busy season. It is recommended to pick a time of the year that is not busy so that there are fewer transactions, and it will be convenient for the staff to close the books.
2. Companies that are a subsidiary company must ensure that their financial year-end coincides with the holding company.
3. The financial year-end of some companies can be determined by agreements that the company has entered, such as a joint venture agreement.

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How to change the financial year-end in Indonesia?

Indonesian companies can change their financial year-end by amending the articles of association and requesting approval from the Directorate General of Taxes, the Indonesian Investment Coordinating Board (BKPM) and the Ministry of Law and Human Rights.

Changing the financial year-end will be permitted if the company meets the following conditions:

• The request to change the financial year is submitted for the first time, and there are no future plans to apply for another amendment. The company can change for the second time; however, the approval is subject to tax office assessment.
• The company has no intentions of changing its financial year for tax evasion purposes.
• The amendment is required by the company’s shareholders, creditors, business partners or government authorities, and the company may suffer a loss if the financial year is not changed.

Once the company amends its articles of association and receive approval from the Ministry of Law and Human Rights, the company can submit an application to the Directorate General of Taxes.

The Directorate General of Taxes has full authority to approve or reject the amendment of the financial year-end.

Conclusion

Every company is free to determine the financial year-end. Most of the financial year-end in Indonesia is 1 January to 31 December. The companies are able to change their financial year-end with the Directorate General of Taxes approval. Do not hesitate to contact Acclime if you need any advice.