AUDIT EXEMPTION RULES

AUDIT EXEMPTION

SUBSIDIARY LEGISLATION 372.33

AUDIT EXEMPTION RULES

15th July, 2025 *

LEGAL NOTICE 139 of 2025.

The title of these rules is the Audit Exemption Rules.

In these rules, unless the context otherwise requires

"Act" means the Income Tax Management Act;

"Commissioner" shall have the same meaning as

assigned to it in the Income Tax Act;

"Minister" means the Minister responsible for finance;

"review report" shall have the same meaning as assigned

to it in guidelines published on the website of the

Commissioner for Tax and Customs in accordance with the

provisions of article 96(2) of the Income Tax Act.

Without prejudice to the fulfilment of any other

conditions as prescribed by these rules, the auditor’s report referred to

in article 19(4)(a) of the Act shall not be required for the first two (2)

accounting periods of a newly registered company whose sole

shareholders are individuals in possession of educational

qualifications and who have set up the new company within three (3)

years of obtaining the said qualifications

Provided that for the purposes of this rule as well as rules

4 and 5

"company" refers to a company as defined in the Income

Tax Act whose annual turnover does not exceed eighty

thousand euro (€80,000) or a pro rata amount if the relevant

accounting period is other than twelve (12) months;

"educational qualifications" refers to the successful

completion of a course of study at MQF level 3, or higher, as

recognised by the Malta Qualifications Recognition

Information Centre.

(1)

Where a company does not avail itself of the audit

report waiver in accordance with rule 3, it may claim a deduction

against its income of one hundred and twenty per cent (120%) of the

costs incurred for such auditor’s report.

*These rules shall come into force with effect from accounting periods commencing on,

or after 1 January 2024.

AUDIT EXEMPTION

(2)

The deduction under sub-rule (1) shall apply for the first

two (2) accounting periods of a newly registered company whose sole

shareholders are individuals in possession of educational

qualifications and who have set up the new company within three (3)

years of obtaining the said qualifications.

(3)

The deduction claimed under this rule may not exceed

seven hundred euro (€700) for each accounting period.

The audit report waiver in accordance with rule 3 and the

deduction in accordance with rule 4 shall cease to apply with

immediate effect if there is a change in the shareholding of the

company as a result of which the shareholders shall not all be

individuals who have attained the educational qualifications as

referred to in rule 3.

*

(1)

Without prejudice to the provisions of rules 3, 4

and 5 and save for companies registered under the Merchant Shipping

Act

(a)

where a company registered in Malta benefits

from an exemption in accordance with article 185(2) to the

Companies Act on the basis of satisfying two (2) of the three

(3) criteria establishing therein, the audit report requirements in

connection with the records that shall be kept in accordance

with article 19(4)(a) of the Act, shall also be deemed to have

been discharged when a review report has been made;

(b)

where a company registered in Malta benefits

from an exemption in accordance with article 185(2) of the

Companies Act on the basis of satisfying three (3) of the three

(3) criteria established therein, the audit report requirements in

connection with the records which shall be kept in accordance

with article 19(4)(a) of the Act, shall be deemed to have been

discharged despite the absence of a statutory audit.

(2)

When a company that is required to prepare consolidated

accounts in accordance with the Companies Act, fulfils the criteria

referred to in sub-rule (1), the treatment under paragraphs (a) or (b) of

sub-rule (1) shall apply as long as the group of which it forms part

continues to qualify as a small group in accordance with the criteria

established in article 185(5) of the said Act.

(1)

Without prejudice to the provisions of rules 3, 4

and 5 where a company registered in Malta is registered under the

Merchant Shipping Act and benefits from an exemption provided for

in regulation 64 of the Merchant Shipping (Shipping Organisations –

Private Companies) Regulations, the audit report requirements in

*Rule 6 shall come into force with effect from accounting periods commencing on, or

after 1 January 2025.

AUDIT EXEMPTION

connection with the records that shall be kept in accordance with

article 19(4)(a) to the Act shall be deemed to have been discharged

despite the absence of a statutory audit.

(2)

When a company that is required to prepare consolidated

accounts in terms of the Companies Act, fulfils the criteria referred to

in sub-rule (1), the treatment under this rule shall apply as long as the

group of which it forms part continues to qualify as a small group in

accordance with the criteria established in article 185(5) of the said

Act.

Provided that in any case such thresholds shall be those

as established in regulation 64 of the Merchant Shipping (Shipping

Organisations – Private Companies) Regulations.

The provisions of article 185(3) to the Companies Act

shall apply in determining whether, at balance sheet date, a company

registered in Malta may avail itself of the option provided for in rules 6

and 7 for that accounting period.

Where a company registered in Malta is one to which the

proviso to article 19(4)(a) to the Act applies, the determination as to

eligibility under rules 6 or 7 shall be established by reference to the

criteria as applicable to the said company’s activities in Malta.