The publication of the Audit Exemption Rules, 2025 marks a meaningful update to Malta's regulatory framework for startups and small enterprises. Introduced through Legal Notice 139 of 2025, these rules aim to ease certain compliance obligations and offer targeted relief to newly established companies meeting specific criteria.
The new framework applies to accounting periods commencing on or after 1 January 2024, with the exception of Rule 6, which becomes effective for accounting periods starting on or after1 January 2025.
This summary outlines the main provisions and conditions set out under the new rules.
1. Audit Exemption for Newly Registered Companies (Rule 3)
Newly formed companies may benefit from an audit exemption for their first two accounting periods, provided the following requirements are satisfied:
- The company is exclusively owned byindividuals.
- These individuals hold educational qualifications at MQF Level 3 or higher, recognised by the Malta Qualifications Recognition Information Centre.
- The company is incorporated within three years of the shareholders obtaining the above qualifications.
- The company's annual turnover does not exceed €80,000, or a proportionate amount in the case of a shorter accounting period.
Where these conditions are met, the company is not required to obtain the statutory auditor's report referred to in article 19(4)(a) of the Income Tax Management Act.
2. Tax Deduction for Voluntary Audit (Rule 4)
Companies eligible for the above exemption but opting to undertake an audit voluntarily may claim a tax deduction equal to 120% of the audit fee, up to a maximum of €700 per accounting period. This incentive applies only to the first two accounting periods of qualifying companies.
3. Disqualification Following Change in Shareholding (Rule 5)
If the company's shareholding changes such that not all shareholders meet the individual and educational criteria, the exemption and deduction under Rules 3 and 4 cease to apply immediately.
4. Exemptions Aligned with the Companies Act (Rule 6)
Effective from 1 January 2025, companies that meet the criteria under article 185(2) of the Companies Act(Cap. 386) are treated as follows for tax audit purposes:
- Companies satisfying two of the three thresholds are required to submit a review report in place of a full audit.
- Companies meeting all three thresholds are not required to submit an audit or review report.
This treatment extends to companies preparing consolidated accounts, provided the group qualifies as a small group in terms of article 185(5) of the Companies Act.
5. Shipping Companies (Rule 7)
Companies registered under the Merchant Shipping Act (Cap. 234) and benefitting from exemption under regulation 64 of the Merchant Shipping (Shipping Organisations – Private Companies) Regulations are deemed to have satisfied their audit obligations under the Income Tax Management Act, even where no audit is carried out. The same applies to small groups preparing consolidated accounts.
6. Determining Eligibility (Rules 6, 7, and 9)
Eligibility under Rules 6 and 7 is assessed based on the company's position at the balance sheet date, in line with article 185(3) of the Companies Act. In the case of non-resident companies, Rule 9 states that eligibility for audit exemption is determined by reference to activities carried out in Malta.
7. Repeal of Earlier Provisions (Rule 10)
The Audit Report Waiver and Deduction Rules (S.L. 372.29) have been repealed. However, any actions taken under the previous rules remain valid.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
