The 2025 Audit Exemption Rules L.N.139 of 2025, repealing the Audit Report Waiver and Deduction Rules S.L.372.29, introduce new rules for newly incorporated companies and for companies falling under the Companies Act and the Merchant Shipping Act. Such companies may now benefit from an audit exemption subject to certain conditions. These rules are effective for accounting periods starting on or after 1 January 2024, except for Rule 6, which applies to accounting periods starting on or after 1 January 2025.
Rule 3 – Eligibility
A newly incorporated company shall benefit from an audit exemption for the first two accounting periods provided that:
- Sole shareholders are individuals.
- Such individuals are in possession of educational qualifications at MQF level 3 or higher as recognised by the Malta Qualifications Recognition Information Centre.
- Company must be registered within three years of the shareholders obtaining the above qualifications.
- Company's turnover does not exceed €80k or a pro-rata amount if the accounting period is less than twelve months.
The audit report referred to in Article 19(4)(a) of the Income Tax Management Act is not required once the above conditions are satisfied.
In accordance with Rule 4, companies not availing themselves of the audit report waiver can claim a deduction of 120% of the costs incurred for the first two accounting periods subject to a capped amount of €700 for each accounting period.
The audit report waiver and the deduction under Rules 3 and 4 shall cease to apply with immediate effect in the event of any changes affecting the above qualifying conditions.
Rule 6 – Audit Exemption Companies Act
With effect from 1 January 2025, companies benefitting from an exemption by satisfying two of the three thresholds in Article 185(2) of the Companies Act are required to submit a review report instead of an audit report, whilst companies satisfying all three thresholds are exempt from submitting an audit or review report. These provisions also apply to companies preparing consolidated accounts and qualifying as a small group in accordance with Article 185(5) of the Companies Act.
Rule 7 – Merchant Shipping Act
Companies registered under the Merchant Shipping Act and benefitting from an exemption in terms of regulation 64 of the Merchant Shipping (Shipping Organisations – Private Companies) Regulations are deemed to have satisfied the audit report requirements in terms of article 19(4)(a) of the Income Tax Management Act despite the absence of a statutory audit. This rule is extended to group companies preparing consolidated accounts and qualifying as a small group.
Rules 6, 7 and 9 – Eligibility
The applicable thresholds in relation to Rules 6,7 and 9 are those established in Article 185(2) of the Companies Act and regulation 64 of the Merchant Shipping (Shipping Organisations – Private Companies) Regulations and eligibility is subject to the company's position at balance sheet date in terms of the provisions of Article 185(3) of the Companies Act.
Rule 9 – Non-Resident Companies
With respect to companies not resident in Malta, the proviso to article 19(4)(a) of the Income Tax Management Act applies to such companies by reference to the activities carried out in Malta.
Rule 10 – Repeal of Earlier Provisions
Any actions taken under the repealed Audit Report Waiver and Deduction Rules S.L. 372.29 remain valid.
MTCA Guidelines
The MTCA has issued guidelines on these new rules which provide examples on the application of Rule 6 of these rules.
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.
