Question

If a taxpayer changes its taxable year, the interval between the last full taxable year prior to the change and the starting date of the new taxable year shall be considered as a short independent fiscal period.

The first year of a new taxpayer or the last year of a taxpayer in case of discontinuation or liquidation, may be a short independent fiscal year. Why? Explain with example.

Answer 1

As per Chapter 6, Tax Accounting Rules of Article 22,

If a taxpayer changes its taxable year, the interval between the last full taxable year prior to the change and the starting date of the new taxable year shall be considered as a short independent fiscal period.

The first year of a new taxpayer or the last year of a taxpayer in case of discontinuation or liquidation, may be a short independent fiscal year unless it is stipulated to be a long fiscal year in accordance with Companies Law.

Further, as per Article 60: Declarations,  A taxpayer who ceases business activity is required to notify the Department and to present, within sixty days from the cessation date, a tax declaration for the short taxable period ending with the date on which it ceases business.

Thus, for example, if a person is closing his business in July 30, he need to mention the aurhorities about the same and file his return for the period Jan to July within 60 days frin July 30.

In case of such questions please mention the country you want tax laws answers of. By help of google search I believe this is from Saudi and not USA. Please let me know if this is so, I shall correct my answer accordingly.