Audit Exemption - What does it mean for my company?

In 2025, Malta introduced an audit exemption framework under Legal Notice 139 of 2025, aimed at easing the regulatory and cost burden for Start-up entities and Micro Companies. While this change offers more flexibility and aligns the Companies Act with the Income Tax Act, it also raises an important question about when a full statutory audit may still be the most prudent option.

For further details about audit exemptions for Start-up entities, Micro Companies and Companies registered under the Merchant Shipping Act, please refer to our article titled “Malta Introduces New Audit Exemption Framework under Legal Notice 139 of 2025”.

As a reminder, the Micro Companies’ exemption established the following three thresholds:

• Turnover:  ≤ €93,000; and

• Total assets ≤ €46,600; and

• Average number of employees ≤ 2

  
  

If all three criteria are met, a full audit exemption applies. If two out of three criteria are met, a review engagement in accordance with ISRE 2400 (Revised) is required. If one or none of the criteria are met, a full statutory audit must be carried out.

For further details about the differences between a full statutory audit and a review engagement, please refer to our article titled “Review Engagements under ISRE 2400 (Revised): Scope, Objectives and Key Differences from a Statutory Audit”.

In addition to these thresholds, one must keep in mind other factors that may limit an entity from using the audit exemption framework such as bank covenants, regulatory oversight or licensing requirements, group reporting requirements, shareholders needs and future growth plans. At times, the limited cost savings or the pain of undergoing an audit when it is not statutorily required, may save future headaches and costs in relation to auditing future opening balances from financial records. One must also keep in mind that an audit carried out in accordance with International Standards on Auditing (ISAs) always provides the highest level of assurance.

A common query is that if the directors decide to opt for any of the options presented under Legal Notice 139 of 2025, what will be the financial reporting obligations and the obligations from a tax point of view? A common misconception is that if three out of three criteria are met, one has no annual statutory obligation.  The following summarizes the financial reporting and taxation reporting obligations under the audit exemption and the review engagement routes;

• Audit Exemption:

  • Advise current auditors to resign (if any); and

  • Prepare financial statements in accordance with GAPSME, based on unaudited financial records for the reporting period and submit such financial statement with the Malta Business Registry (MBR); and

  • Prepare an annual tax return based on the prepared financial statements and submit to the Commissioner for Revenue (CFR).

• Review Engagement:

  • Advise current auditors to resign (if any) and to plan to carry out a review engagement; and

  • Prepare financial statements in accordance with GAPSME based on financial records subjected to a review engagement for the reporting period and submit such financial statements with the MBR; and

  • Prepare an annual tax return based on the prepared financial statements and submit to the CFR.

One should always ensure to discuss any proposed plans with qualified accountants or auditors to ensure that one remains complaint with the necessary regulations.

At Quazar, we assist clients in assessing which assurance framework best aligns with their statutory obligations and long-term objectives, ensuring transparency, compliance and informed decision-making. 

Get in Touch:

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Daniel Galea

dgalea@quazar.mt / +356 2388 4600