Malta: Are you exempt from performing an audit?
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Did you know that you can be exempted from carrying out a legal audit in Malta? Many have asked us if it is possible to save money by doing an audit, especially startups. The financial regulator heard these requests and published in 2019 the legal opinion 101 which bears the name Companies Regulation (exemption from verification). This new regulation exempts a small number of companies from having their financial statements audited for the first periods.
Many governments, economists and policymakers around the world say small businesses and start-ups are the backbone of a strong economy. As such, governments all over the globe are trying to implement new measures that encourage new businesses to grow and prosper.
Malta is no exception. On the contrary, the island tries to attract and encourage new businesses to settle there. One of the many steps taken to ensure that the jurisdiction is viewed in a more favorable light than others has been to remove the statutory audit requirement, albeit for a limited period of time.
This subsidiary regulation has been drafted on only 2 pages to keep it simple and avoid bureaucracy. With this in mind, in addition to requiring the company to be registered in Part 5 of the Companies Act, only 2 criteria have been listed to exempt a company from having to perform an audit in Malta.
The first test that has been established requires ALL shareholders of the company to be qualified shareholders. The regulation defines qualified shareholders as those who have obtained qualifications classified at least at MQF3 level. MQF stands for Malta Qualification Framework. O-level exams are considered MQF3. To learn more about the MQF and the different levels, click on here.
The second and only other criterion which is part of this regulation requires the company to have a turnover of less than 80,000 euros over 12 months. If the first count is more than 12 months, the 80,000 euros must be prorated.
This exemption is not automatic and is only applicable for the first 2 years. It is up to the directors to request such an exemption by sending a letter to the Registrar of Companies confirming that the above criteria have been met and that the Company is not availing itself of any other exemption. This letter must be sent within the first six months of the end of the year.
Finally, the registrar notifies the commissioner that the company has availed itself of such an exemption.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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