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Some businesses may be exempt from annual audits

06
Photo: Christos Theodorides

The finance ministry and the tax department on Tuesday indicated their agreement for certain companies to be exempt from annual audits.

The discussion took place at the House commerce committee, picking up from an earlier session examining four bills aimed at simplifying the manner in which businesses prepare and file their annual financial statements.

Three of the legislative proposals relate to companies with a turnover and balance sheet of under €700,000 and €1 million, respectively; the fourth bill concerns companies with a turnover of under €200,000.

Rather than these companies be subject to normal audits, the bills propose that instead they undergo ‘reviews’ signed off by a certified auditor.

But the government has counter-proposed that the exemption for a full audit apply only to companies whose total revenues do not exceed €100,000 and whose total assets (before deducting liabilities) are less than €200,000 over the last two years.

This would apply to 31,725 corporations, or 36.6 per cent of all companies.

In addition, where a person (together with their spouse and underage children) possesses a direct or indirect stake of over 50 per cent in a company – shares, a right to earnings or voting rights – the government agrees that they be exempt from a mandatory audit if their consolidated financial results do not exceed the same €100,000 revenue and €200,000 asset thresholds.

A tax department official told MPs that the number of companies currently complying – in terms of submission of annual audits and the payment of the company registration fee – comes to some 180,000.

The legislative initiative is prompted by the EU’s ‘accounting directive’.

Under that directive, companies with limited liability doing business in the EU, whatever their size, have to prepare annual financial statements and file them with the relevant national business register. Groups have to prepare consolidated financial statements.

The accounting directive aims at reducing the administrative burden for small companies. It allows a simplified reporting regime for small and medium-sized enterprises and a very light regime for micro-companies (those with less than 10 employees).

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