Malta: Audit report exemptions for small companies

Legal Notice 139 of 2025 introduced exemptions from the requirement of having an audit report for certain small companies under the Income Tax Management Act (ITMA). Previously, Article 19(4)(a) of the ITMA required all companies registered in Malta to prepare a balance sheet and profit and loss account with an accompanying auditor’s report.

As of January 1, 2024, newly incorporated companies may opt for a waiver from the requirement to accompany their financial statements with an auditor’s report for the first two accounting periods, provided they meet specific criteria, including:

• Annual turnover of the company does not exceed €80,000 (or a pro-rata amount if the duration of the relevant accounting period is other than 12 months)
• Sole shareholders of the company are individuals in possession of educational qualifications recognized at MQF level 3 or higher
• The company is set up within three years from obtaining such qualifications

Companies that choose not to claim the waiver may claim a tax deduction of 120% of the auditor’s report costs, up to €700 per period.

Additionally, Legal Notice 139 of 2025 exempts companies from audit obligations if they do not exceed two of the three thresholds under Article 185(2) of the Companies Act. Companies meeting these criteria may prepare a “review report” instead. This exemption also applies to small groups under the Companies Act and companies registered under the Merchant Shipping Act, with specific thresholds outlined for each.

Read an August 2025 report prepared by the KPMG member firm in Malta