Malta’s New Audit Exemption Rules: Key Updates for 2025
Malta’s regulatory framework for startups and small enterprises has been significantly updated with the introduction of the Audit Exemption Rules, 2025, through Legal Notice 139 of 2025. These rules, which are aligned with the Income Tax Management Act (ITMA) and the Companies Act, are designed to ease compliance by reducing audit obligations for qualifying companies.
The new framework applies to accounting periods beginning on or after January 1, 2024, with the exception of Rule 6, which is effective for periods starting on or after January 1, 2025. The following are the key provisions of these new rules:
Audit Exemption for Newly Registered Companies (Rule 3)
Newly incorporated companies may be exempt from the requirement to obtain an auditor’s report for their first two accounting periods. To qualify for this exemption, a company must meet the following criteria:
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- The company must be entirely owned by individuals.
- All shareholders must possess educational qualifications at MQF Level 3 or higher, recognized by the Malta Qualifications Recognition Information Centre.
- The company must be established within three years of the shareholders receiving these qualifications.
- The annual turnover must not surpass €80,000, pro-rated for shorter periods.
Tax Deduction for Voluntary Audits (Rule 4)
Qualifying companies that choose to undergo a voluntary audit can claim a tax deduction of 120% of the audit costs. This deduction is capped at €700 per accounting period and is available for the first two accounting periods only.
Disqualification Following a Change in Shareholding (Rule 5)
The audit exemption and the tax deduction for voluntary audits will no longer apply if the company’s shareholding changes and not all shareholders continue to meet the required educational criteria.
Alignment with the Companies Act (Rule 6)
Effective from January 1, 2025, this rule aligns with Article 185(2) of the Companies Act. Private companies that do not exceed two of the following three thresholds may submit a review report, prepared under ISRE 2400, instead of an audit report:
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- Balance Sheet Total: €46,600
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- Turnover: €93,000
- Average Number of Employees: 2
Furthermore, if a company does not exceed any of these three thresholds, neither an audit nor a review report is required. These same rules also apply to companies preparing consolidated accounts, provided the group qualifies as a small group as defined by the Companies Act. For a small group, the thresholds are:
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- Aggregate balance sheet total: €4 million net or €4.8 million gross
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- Aggregate turnover: €8 million net or €9.6 million gross
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- Aggregate employees: 50
Exemption for Shipping Companies (Rule 7)
This exemption, which took effect on January 1, 2024, applies to companies registered under the Merchant Shipping Act. They can be exempt from audit obligations if they do not exceed two of the following three thresholds:
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- Balance sheet total: €6 million
- Turnover: €12 million
- Average employees: 50
This exemption also extends to qualifying small groups under Regulation 64 of the Merchant Shipping (Shipping Organisations – (Private Companies) Regulations.
Determining Eligibility
Eligibility for these exemptions is determined at the balance sheet date, in accordance with Article 185(3) of the Companies Act. For non-resident companies, eligibility is based on their activities carried out in Malta.
Repeal of Earlier Provisions
The Audit Report Waiver and Deduction Rules (S.L. 372.29) have been repealed, though any actions already taken under the old rules remain valid.
Summary of Benefits
The new rules provide startups and small enterprises with a reduced compliance burden during their initial years. They offer flexibility by allowing qualifying companies to opt out of an audit while still providing tax benefits for those who voluntarily undergo one. The framework also integrates income tax obligations with the Companies Act and provides sector-specific relief for shipping companies.
Considering Malta’s new audit exemption rules? Our team can guide you through the process, ensuring it’s handled smoothly and efficiently. Contact us for advice and assistance.
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