What is a Fiscal Year? When Does It Start?

If you run a business or want to understand better financial processes, the concept of a “fiscal year” lies at the heart of it all. From your income-expense balance to tax planning, from budgeting to year-end reports, this period underpins many critical processes. Regardless of the starting month, this 12-month fiscal period regulates operations and enables you to make healthier financial decisions and fulfill legal obligations on time. So, what exactly is a fiscal year? Why is it so important? And how is it related to taxes? In this article, we answer key questions about the fiscal year.

What is a Fiscal Year?

A fiscal year is 12 months used for tracking, reporting, and taxing the financial transactions of a business or institution. It aims to ensure that income, expenses, profits, and tax calculations are carried out in an orderly, comparable, and legally compliant manner. In Turkey, the fiscal year is often aligned with the calendar year. However, this period does not necessarily have to match the calendar year, i.e., January 1–December 31. Companies or government agencies may determine the start of the fiscal year based on their peak operational periods. For instance, some companies may prefer to start their fiscal year in July and end it in June to consolidate their peak sales periods into one fiscal year. The fiscal year is typically named after the year in which it ends. For example, a fiscal year beginning on July 1, 2024, and ending on June 30, 2025, would be referred to as the “2025 fiscal year.”

The Importance of the Fiscal Year and Financial Management

The fiscal year plays a significant role in a company’s financial management, budgeting, and tax strategy planning. If chosen correctly, it enables expenses and profit/loss to be reported in line with the business cycle and allows for comparable analyses. Additionally, the fiscal year provides flexibility in tax planning. For instance, shifting income or expenses to the end or beginning of the year can help optimize the timing of tax liabilities. From a financial management perspective, detailed financial statement analyses conducted at the end of the fiscal year provide valuable data for calculating taxable income and identifying applicable deductions and credits. These analyses also contribute to the accurate calculation of tax refunds. In year-end planning, such analysis helps maximize tax advantages and avoid unexpected liabilities. When fiscal year planning is aligned with corporate goals, it enables more informed decisions in budgeting and forecasting processes. For example, budget preparations that begin a few months before the end of the period can help plan for the next fiscal year’s expenses, investments, and taxes more efficiently.

The Relationship Between the Fiscal Year and the Tax Period

Since tax declarations are prepared based on the company’s fiscal year, there is a direct relationship between the fiscal year and the tax period. The fiscal year refers to the 12-month period in which a company tracks its financial activities, and taxes are calculated based on the income and expenses recorded during this time. In Turkey, the fiscal year typically aligns with the calendar year, so annual tax declarations such as corporate income tax also cover this period and are submitted in March or April of the following year. However, in some countries or under exceptional circumstances, the fiscal year may differ from the calendar year. In such cases, the tax declaration must be submitted to the tax office within a specific period (usually 3–4 months) after the end of the fiscal year. Therefore, the start and end dates of the budgetary year directly affect the timing and content of tax declaration preparation. This relationship enables businesses to develop more effective strategies in tax planning by considering their periodic income and expenses.

Year-End Reporting and Analysis

At the closing of the fiscal year and during year-end reporting, companies finalize their financial period and transfer into a new fiscal year. In this process, all income and expense accounts are closed, and balances are transferred to permanent accounts in the balance sheet. Then, opening balances for the new fiscal year are created. As a result, financial statements such as the balance sheet, income statement, and cash flow statement can be prepared accurately and reliably.
Before performing the year-end closing, accounting teams make adjusting entries such as income recognition, depreciation, and period-end provisions, and complete reconciliations for bank, receivables, and payables. In this way, temporary accounts are zeroed out, and permanent accounts are carried forward to the new fiscal period. After the closing, the generated opening entries form the basis for the new fiscal year’s starting balances and prepare the ground for reporting.
Timely and accurate year-end reporting supports legal compliance and minimizes the risk of penalties due to late filing, errors, or omissions. Thanks to early planning and systematic closing processes, error risk is reduced, the need for later corrections decreases, and the reliability of reports increases.

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