20 August 2025
Section 22 of the Companies (Corporate Governance, Enforcement and Regulatory Provisions) Act, 2024 was commenced into law on 16 July 2025 and introduced changes to the Audit Exemption Regime. The changes should result in an increased number of small and micro sized (non group) companies being entitled to avail of an exemption from having their annual financial statements audited.
Qualifying companies can avail of an exemption from the requirement to have their statutory financial statements audited on the grounds that they qualify as either (i) a small company or (ii) are dormant and meet the associated additional criteria in each case (which are detailed below).
The changes to the regime apply to both dormant and stand-alone (non group) small and micro companies. The changes do not apply to small group companies.
Previously, in order to retain its audit exemption, small & micro (non-group) companies had to file their annual return and financial statements on time (i.e. within 56 days of their current Annual Return Date).
From 16 July 2025, small or micro (non group) companies will only lose their entitlement to avail of audit exemption if they file their annual return and financial statements late twice in a five year period.
An annual return filed prior to 16 July 2025, and which was filed late will require the preparation and filing of audited financial statements for the subsequent two financial years following the late filing.
An annual return filed on or after 16 July 2025, and which is late, will not of itself result in the loss of the audit exemption. However, if an annual return late again within a 5-year period, the audit exemption will be lost for the subsequent two financial years.
The loss of audit exemption can give rise to significant additional compliance costs when audit fees and Companies Registration Office late filing penalties are taken into account. While the Companies Registration Office will continue to charge late filing fees on any annual returns filed more than 56 days after the annual return date, the amendments made to the audit exemption regime will remove the burden of audit fees for a first time offender in any given five year period.
There are additional criteria to be satisfied in order to avail of sized-based and dormant company audit exemption, which are detailed below. The changes introduced on 16 July 2025 do not modify or amend these criteria.
In order to avail of the small-size audit exemption, a qualifying company must satisfy two of the following conditions, both generally in respect of the financial year concerned and the preceding financial year, unless the year in respect of which the exemption is being claimed is the company’s first financial year:
Dormant companies, other than a public limited company and an investment company, may avail of the dormant company audit exemption if the qualifying conditions are met and the decision to avail of the dormant company audit exemption is recorded by the directors in the minutes of a meeting of directors held before the end of the financial year concerned.
The qualifying conditions which must be met during the year in question to qualify as dormant are as follows:-
In deciding whether or not a company is dormant, a company may disregard any transaction arising from:-
The dormant company audit exemption is not subject to any size criteria. Therefore, while a company might not qualify for audit exemption because it is part of a group, it could still qualify for the dormant company audit exemption
A holding company or subsidiary company may qualify for audit exemption based on group size. The changes to the Audit Exemption Regime introduced on 16 July 2025 do not apply to Group companies and the old rules continue to apply.
A qualifying holding company or subsidiary company may avail of an audit exemption, if the largest group of which it is a member satisfies two of the following conditions, both in respect of the year concerned and the preceding financial year, unless the year in respect of which the exemption is being claimed is the company’s first financial year:
* net figures refer to amounts after set-offs and other adjustments made to eliminate group transactions.
All Irish and non-Irish companies in the Group must be included in determining whether the small size audit exemption criteria have been met.
If a company is a holding company or a subsidiary company and any member of that group has filed its Annual Return late, then no member of that group can avail of the audit exemption for the next two financial years.
