The Audit Exemption Rules, 2025, enacted via Legal Notice 139 of 2025, introduce a significant simplification for startups, SMEs, and shipping companies in Malta. While the rules apply to accounting periods beginning on or after 1 January 2024, the key changes under Rule 6, which align audit requirements under the Income Tax Management Act (ITMA) with the Companies Act, will apply from 1 January 2025.

Newly registered companies may be exempt from preparing an audit report for their first two accounting periods, provided that all shareholders are individuals, each of whom has completed an MQF Level 3 qualification or higher, and the company was set up within three years of obtaining such qualifications. The company must also not exceed €80,000 in turnover (or the pro rata amount for shorter accounting periods). If these criteria are satisfied, an audit report under the ITMA is not required. If the company still chooses to engage an auditor, it may claim a 120% tax deduction, capped at €700 per year, for the first two years. This exemption is lost immediately if new shareholders without the required educational background are introduced.

For existing companies, those satisfying two out of the following three thresholds under Article 185(2) of the Companies Act may satisfy ITMA audit requirements by preparing a review report instead of a full statutory audit:

• Turnover ≤ €93,000
• Balance sheet total ≤ €46,600
• Average number of employees ≤ 2

The review engagement has to be conducted in accordance with the International Standard on Review Engagements (ISRE) 2400, as issued by the International Auditing and Assurance Standards Board (IAASB).

Where all three thresholds are met, the company is fully exempt from the statutory audit requirement. Nonetheless, it remains obliged to keep proper accounting records in accordance with Article 19(4)(a) of the ITMA.

Parent companies may also benefit from this exemption if the group qualifies as a small group under Article 185(5) of the Companies Act, based on the following limits:

• Balance sheet total: €4.8 million gross / €4.0 million net
• Turnover: €9.6 million gross / €8.0 million net
• Employees: 50

In the maritime sector, companies registered under the Merchant Shipping Act may qualify for exemption under Regulation 64 of the Merchant Shipping (Shipping Organisations – Private Companies) Regulations. This includes companies that are part of a consolidated group, subject to the thresholds set under shipping law.

Please contact our Audit and Assurance team to guide you on what will change for you and your company.