Do we change US Tax Year to synch with India Stautory Tax Yr or stay with WW FY

I have heard conflicting recommendations with regard to changing our tax year. We have a significant Indian operation which follows the statutory tax year thru March in India.

The US HQ and investors use a fiscal year ending January.

I've heard a one recommendation to change the US tax year to March to line up with India since auditors will require a second audit on India if the tax years are different. However I have also heard that it is common to keep separate tax years and make US tax year consistent with HQ and sales Fiscal year.

Can folks give me their thoughts here. I have worked with multiple tax year ends for foreign entities and think a separate Indian audit sign off is going to be necessary regardless. What am I missing? Will internal back office work go up with financial accounting different from tax, or will work internally go down having them lined up (US and India tax yrs)?

Thx

Answers

Frank Possinger Treasurer • January 11, 2013

The statutory audit is always necessary aside from your US GAAP audit. Being in the same boat with a US based partnership just grin and bear it. There are also some timing differences which make the figures different even if you use the same year end.

Patrick Zanoni Vp Controller • January 12, 2013

Thanks. Yes The more I think about this the more I think we should keep the US Tax year the same as the our company FY (since we have US HQ and mostly US Sales). It sounds like you agree. If you disagree, please let me know.

Katherine Simmonds Agent • January 13, 2013

If the Indian company has been an investment for a number of years, then your parent either continued the Indian tax year or adopted it for tax planning reasons.

The best thing to do is get in touch with your tax department and learn about the reason for choosing an Indian tax year different from the US tax year.

Since we do not have insight as to consolidation vs not consolidated or seasonality with the question posed including a host of other tax planning points, any answer to your question would be inadequate.

Tax decisions should not be made on the basis of convenience for the accounting department or for the reduction of administrative difficulty if if the underlying tax planning was intended to achieve a certain purpose.

Check with your tax department or the outside CPA who helped with the strategy.

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Do we change US Tax Year to synch with India Stautory Tax Yr or stay with WW FY

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