The recent publication of Legal Notice 139 of 2025 introduces the Audit Exemption Rules, 2025, a measure intended to reduce the compliance burden on startups and small companies that meet specific eligibility thresholds. Coming into effect for accounting periods starting on or after 1 January 2024 (with some provisions delayed until 2025), the rules are expected to create both opportunities and points for reflection, particularly around clarity, risk, and long-term strategy.

At a glance, these rules provide welcome simplification. However, the decision to apply an audit exemption should not be taken lightly. Businesses must assess not just whether they qualify, but also whether opting out of a statutory audit is in their best interest.

Who qualifies for the exemption?
The Rules lay out three distinct pathways to exemption, primarily based on company size, ownership structure, and timing of incorporation. The eligibility criteria are as follows:

Rule 3 – Startups led by qualified individuals
For newly registered companies, an exemption from the statutory audit is available for the first two accounting periods if all the following conditions are met:

  • The shareholders are individuals (not legal persons).
  • These individuals possess an MQF Level 3 qualification or higher, as recognised by the Malta Qualifications Recognition Information Centre.
  • The company was set up within three years of the individuals obtaining these qualifications.
  • The company’s annual turnover does not exceed €80,000, or a proportionate amount if the financial year is shorter than 12 months.

If all these criteria are satisfied, the company is exempt from having to produce an auditor’s report for its first two years.

Rule 4 – Partial support for those opting to audit
Companies that qualify under Rule 3 but still choose to undertake an audit may claim a 120% tax deduction on the cost of the auditor’s report, capped at €700 per accounting period. This measure incentivises good governance while supporting small business costs.
Both Rules 3 and 4 are immediately revoked if there is a change in shareholding, such that not all shareholders remain qualifying individuals.

Rule 6 – Small companies under the Companies Act
Starting from accounting periods commencing on or after 1 January 2025, companies that meet the small company criteria set out under Article 185(2) of the Companies Act may also benefit from audit exemption under tax law:

  • If a company meets two out of three criteria, a review report (a lighter form of assurance than an audit) will suffice.
  • If a company meets all three criteria, neither an audit nor a review report is required under tax law.

This treatment extends to small groups preparing consolidated accounts, as defined under Article 185(5) of the Companies Act.

Rule 7 – Shipping companies
Companies registered under the Merchant Shipping Act that are already exempt under regulation 64 of the relevant Shipping Organisations regulations are also deemed to have satisfied the audit requirement under tax law, including in cases where the company forms part of a qualifying small group.

Why audit still matters, even when it’s optional
While these changes simplify obligations for qualifying entities, it is crucial to appreciate the role of an audit beyond regulatory compliance. An audit provides:

  • Independent assurance to stakeholders, including banks and investors.
  • A stronger financial control framework aids early detection of internal weaknesses.
  • Enhanced credibility and transparency, especially important when seeking to scale, attract funding, or work with international partners.

Choosing to waive an audit may offer short-term cost savings, but this needs to be balanced against the value of third-party oversight and the long-term vision of the business.

At RSM Malta, we understand that this is not just a compliance issue; it’s a strategic one. Our advisory and assurance professionals are here to guide you through the eligibility criteria, clarify the implications of opting in or out of the exemption, and assess the benefits of continued audits in your particular context.

We can help you answer key questions, such as:

  • Will my business benefit more from short-term savings or from the long-term value of audit assurance?
  • What are the implications of a future change in shareholding?
  • How does this decision align with my company’s growth trajectory or funding plans?

As these new rules come into force, it is essential to take a proactive, informed approach. The audit exemption may be available, but that doesn’t mean it’s always the right choice. Get in touch with our advisory and assurance professionals today for guidance on the best option for you.