SHELTONS INTERNATIONAL GROUP
While the audit exemption for micro companies in Malta was already outlined under the Companies Act, its practical application was previously limited due to obligations arising from the Income Tax Management Act (ITMA). However, the introduction of the Audit Exemption Rules, 2025 – through Legal Notice 139 of 2025 – has harmonised the legislation. Companies that meet the definition of a micro enterprise under Maltese law can now benefit from a full audit exemption, marking a significant shift in corporate tax compliance in Malta.
Which Companies Are Considered ‘Micro’ in Malta?
The audit exemption in Malta can be applied if a private limited company qualifies as a “micro company” under Article 185(2) of the Companies Act (Chapter 386 of the Laws of Malta). To be classified as a micro company, the business must meet at least two out of the following three criteria:
1. Turnover Threshold – The company’s total annual revenue must not exceed €93,000. This includes all income from business operations (sales, services, other revenue streams) before any deductions.
2. Balance Sheet Total – The company’s total assets (including cash, receivables, inventory, property, equipment, and intellectual property) must not exceed €46,600 as per the year-end balance sheet.
3. Number of Employees – The company must employ no more than two (2) people during the financial year. This refers to full-time equivalent (FTE) employees, meaning part-time hours are combined to determine total FTEs. The count is based on the highest number of employees during the year, not just year-end.
If a company fails to meet at least two of these three conditions for two consecutive financial years, it will no longer be eligible for the audit exemption in Malta, ensuring consistency and avoiding short-term classification changes.
Group Companies and the Audit Exemption
For parent or holding companies, the exemption is granted only if:
– The individual entity meets the micro thresholds, and
– The group is classified as a small group.
A group qualifies as ‘small’ if it comprises a parent and its subsidiaries and meets at least two of the following three thresholds, on a consolidated basis, at the parent’s financial year-end:
1. Aggregate Balance Sheet Total: €4,000,000 (net) or €4,800,000 (gross)
2. Aggregate Turnover: €8,000,000 (net) or €9,600,000 (gross)
3. Average Number of Employees: 50
To assist in calculations when consolidated accounts are unavailable:
– “Net” means with the adjustments required for consolidation;
– “Gross” means without such adjustments.
Either basis can be used for compliance, as long as consistency is applied.
When Must a Company Submit a Review Report?
According to the Audit Exemption Rules 2025, a company that meets two out of the three micro criteria must prepare a review report (instead of a full audit report) to satisfy tax return filing obligations in Malta.
If the company satisfies all three criteria (i.e., turnover, assets, and employees), it is fully exempt from submitting either an audit report or a review report with its corporate income tax return.
Key Benefits of Audit Exemption in Malta
For eligible micro businesses and small companies, the audit exemption offers multiple advantages:
Reduced Compliance Costs – Companies can avoid audit fees and related administrative costs. This is especially important for startups and small enterprises in Malta.
Increased Administrative Efficiency – Without the audit requirement, internal resources can be redirected to business development, instead of managing auditor communications and audit document preparation.
These benefits enable Maltese micro companies to focus resources on growth, innovation, and operational improvements.
Limitations and Considerations
While the audit exemption for Maltese companies is beneficial, certain legal and governance considerations remain:
Directors’ Accountability – Without an audit, the full responsibility for the accuracy and integrity of financial statements falls on the company directors. This may be a concern for external directors who prefer third-party verification.
Shareholder or Regulatory Demands – In some cases, shareholders or regulators may still demand audited financial statements, especially where there are questions of transparency or governance.
Group Requirements – Companies part of a group that prepares consolidated financial statements may still require an audit to comply with group-level standards or external reporting obligations.
How to Apply for Audit Exemption in Malta
To apply for the exemption, eligible companies must formally declare their audit exemption status when filing their annual accounts with the Malta Business Registry (MBR).
Proper documentation and records must be maintained to prove continued eligibility. It is recommended to consult a Maltese tax advisor to ensure full compliance and avoid penalties.
Need Guidance on Audit Exemption in Malta?
Remember, compliance is key; consult professionals for assistance and guidance. For personalized guidance, reach out to our tax team at Sheltons Malta or write to us on [email protected].
Disclaimer
The information provided in this article is for general informational purposes only and does not constitute legal, financial, or professional advice. While every effort has been made to ensure accuracy, the writer assumes no liability for any errors or omissions. Readers are encouraged to seek professional advice before making any business or financial decisions based on this content.
