Malta Audit Exemption Rules 2025

The Maltese Government has enacted Legal Notice 139 of 2025 — the "Audit Exemption Rules, 2025", under the Income Tax Management Act (Cap. 372) (ITMA). The rules introduce a structured regime of audit relief for eligible companies, thereby modifying the statutory audit obligations.

Whilst there has always been an audit exemption in the Companies Act (CAP 386) for companies satisfying certain conditions, the Income Tax Management Act (Article 19 (4)) previously required all companies registered in Malta to have their accounts audited. The Audit Exemption Rules in Malta attempt to consolidate the rules by removing this requirement.

Key Relief Streams

The framework provides three principal relief streams:

Start-up Audit Waiver

From accounting periods commencing on or after 1 January 2024, newly incorporated companies may opt to dispense with the requirement to include an auditor's report with their accounts for the first two accounting periods, provided specified conditions are met.

The conditions are:

• All shareholders are natural persons (no corporate shareholders).
• Each shareholder holds a qualification at MQF Level 3 or higher, and the company was incorporated within three years of obtaining that qualification.
• The company's annual turnover does not exceed €80,000, or the proportionate amount if the period is shorter than 12 months.
• If the company instead chooses to have an audit, it may claim a tax deduction equal to 120% of the auditor's fee (capped at €700) for each of the first two accounting periods.
• The waiver and deduction cease to apply if the shareholding changes such that not all shareholders continue to satisfy the individual/qualification requirement.

Small Company Audit‐Relief

From accounting periods commencing on or after 1 January 2025, companies meeting the small-company criteria under Article 185(2) of the Companies Act (Cap. 386) may avail of reduced audit obligations. The thresholds are:

• Balance sheet total: €46,600;
• Turnover: €93,000;
• Average number of employees during the period: 2.

The regime works as follows:

If the entity does not exceed two of the three thresholds, then the statutory audit requirement is regarded as satisfied by the preparation of a review report (engagement under ISRE 2400 (Revised)).

If the entity does not exceed all three thresholds, then no audit or review report is required for tax purposes.

This relief also extends to parent companies preparing consolidated accounts — provided the group qualifies as a "small group" under Article 185(5) of the Companies Act.

For the group thresholds:

• balance sheet €4 m net / €4.8 m gross
• turnover €8 m net / €9.6 m gross
• employees 50.

Shipping / Maritime Sector Relief

Companies registered under the Merchant Shipping Act (Cap. 234) (MSA) that benefit from the exemption under Regulation 64 of the Merchant Shipping (Shipping Organisations – Private Companies) Regulations are treated as having fulfilled the audit obligation under ITMA even where no audit is prepared.

Thresholds for such entities:

• balance sheet €6 million
• turnover €12 million
• employees 50.

Technical & operational considerations

The Guidelines issued by the Malta Tax and Customs Administration (MTCA) define "review report" as a report issued following a review engagement in accordance with ISRE 2400 (Revised).

Eligibility under Rule 6/7 is assessed at the balance sheet date, in line with article 185(3) of the Companies Act.

For non-resident companies, eligibility is determined by reference to the activities carried out in Malta.

The previous regime ("Audit Report Waiver and Deduction Rules" S.L. 372.29) is repealed by Rule 10 of LN 139/2025, with the caveat that historical reliefs remain unaffected.

Practicalities

While the reforms are a welcome change to try to assist the compliance burden for small entities and start–ups by reducing costs and procedural obligations, it should be noted that there are a few practical considerations to consider.

Comparative Figures

The auditor, when issuing their report, will have to have comfort on the comparatives (the previous year's figures) as well as the current year in audit. If the previous years were subject to no audit, having satisfied the audit exemption rules, then the audit process at that point may effectively involve two audits (comparative and current) so that the auditor has comfort and can form an opinion on the accounts. This will potentially lead to a cost increase at that point owing to the extra workload (effectively two years in one audit). This becomes particularly problematic for a company in between the exemption and the need to carry out an audit in subsequent years.

Liquidations

Another practical scenario could be if a company needs to liquidate. At present, liquidation accounts need to be audited, and the liquidator previously had comfort that the previous accounts prior to the company being placed into liquidation would have been audited. If a company has an audit exemption prior to this period and no audit has taken place, the liquidator may not have deemed comfort, and as a result, liquidation expenses may become higher owing to the deemed higher risk. However, a new exemption with regard to Directors being able to strike off the company rather than appointing a liquidator is at the consultation stage (not legislation yet), if it satisfies certain conditions, and this may mitigate this problem.

Credibility

Having an audit also has the added advantage of credibility with financial institutions such as banks. Should the company seek finance, having audited accounts may give the bank added comfort in the credibility and financial health of your business.

It is clear that companies should evaluate whether foregoing an audit remains optimal (especially in terms of financial credibility, business development, and lender/investor requirements). As the MTCA guidance emphasises, the decision to claim an exemption should consider not just eligibility, but broader strategic implications.

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.