Who Qualifies for Audit Exemption in 2026?
Could your Sdn Bhd be eligible to lodge unaudited financial statements? The answer depends on its status, financial-period start date and the SSM criteria it meets.
In this guide, we explain the audit-exemption rules relevant to private companies in Malaysia in 2026. The Companies Commission of Malaysia (SSM) sets the criteria under the Companies Act 2016. They cover dormant companies and threshold-qualified entities. Threshold-qualified entities must meet at least two of three criteria across the current and two immediately preceding financial years.
Claiming the relief correctly allows unaudited financial statements to be lodged. Claiming it wrongly can lead to SSM queries and restated filings. Whether you run a startup, an SME or one of the many multinational companies in Malaysia, check the three relevant financial years. Then get in touch for an eligibility review.
Does Your Company Meet the Private Entity Classification Rule?
Section 267(2) of the Companies Act 2016 allows the Registrar to exempt certain private companies from appointing an auditor. Your entity must be a private limited company (Sdn Bhd) registered with the Companies Commission of Malaysia (SSM). Subsidiaries of public companies, foreign companies and exempt private companies that lodge an exempt-private-company certificate do not qualify under the framework. Confirming this classification first prevents wasted effort. It also keeps statutory filings on the correct track from day one.
How Does a Company Qualify as Dormant?
2 financial years of no business activity and no accounting transactions qualify an existing company as dormant under SSM's rule. These are the current financial year and the immediate past financial year. A company also qualifies if it has been dormant since incorporation. Transactions required by law and their compliance costs are excluded from SSM's definition of an accounting transaction. Review bank statements and ledgers carefully before claiming the exemption.
Does Zero Revenue Alone Qualify a Company for Exemption?
0 revenue alone is not a separate audit-exemption category under Practice Directive 10/2024. A non-dormant company must instead meet at least two of the revenue, asset and employee thresholds for its applicable phase. The former RM300,000 zero-revenue test applied under the revoked Practice Directive 3/2017. It remains relevant only for financial periods commencing on or before 31 December 2024. A newly incorporated company awaiting its first contract should assess the current and two immediately preceding financial years under the applicable framework.
Updated Annual Revenue Threshold
RM2,000,000 is the Phase 2 annual-revenue ceiling for financial periods commencing from 1 January to 31 December 2026. It is one of three threshold criteria. A private company must meet at least two across the current and two immediately preceding financial years. The revenue threshold rises to RM3,000,000 for financial periods commencing on or after 1 January 2027. Companies approaching the ceiling should review management accounts quarterly, because a breach can affect eligibility.
SSM audit-exemption thresholds under Practice Directive 10/2024
| Phase | Financial period commencement | Revenue limit | Total-assets limit | Full-time employee limit | Submission year begins |
|---|---|---|---|---|---|
| Phase 1 | 1 January 2025 to 31 December 2025 | RM1,000,000 | RM1,000,000 | 10 | 1 January 2026 |
| Phase 2 | 1 January 2026 to 31 December 2026 | RM2,000,000 | RM2,000,000 | 20 | 1 January 2027 |
| Phase 3 | On or after 1 January 2027 | RM3,000,000 | RM3,000,000 | 30 | 1 January 2028 |
Total Balance Sheet Asset Cap
Under the asset-based criterion, the Phase 2 total-asset ceiling is RM2,000,000 for financial periods commencing from 1 January to 31 December 2026. For a financial period commencing in 2026, total assets for the current and two immediately preceding financial years must not exceed the Phase 2 ceiling of RM2,000,000. Property, investments and receivables all count toward total assets. A mid-year asset purchase can therefore affect eligibility.
Full-Time Workforce Ceiling
20 full-time employees is the Phase 2 ceiling for financial periods commencing from 1 January to 31 December 2026. It is one of three threshold criteria. At least two criteria must be met for the current and two immediately preceding financial years, using the Phase 2 ceiling of 20 employees for a financial period commencing in 2026. Full-time employees include local, foreign, contract and probationary workers. Directors and shareholders working full time are excluded. SSM treats paid workers as full time when they work at least six hours a day for 20 days a month. It also includes workers who work at least 120 hours a month.
Common Exemption Assessment Pitfall
2 of 3 threshold criteria, not all three, must be met under Practice Directive 10/2024. The qualifying criteria must be satisfied for the current and two immediately preceding financial years using the Phase 2 thresholds when assessing a financial period commencing in 2026. Many owners assume one quiet year with low turnover secures the exemption. It does not. We review the relevant financial periods before advising a company to claim, so never rely on a single-year dip alone.
Ready to Confirm Your Company's Exemption?
Our Malaysia team reviews three years of accounts and handles the unaudited filings with SSM.
Frequently Asked Questions
No. A private company may elect audit exemption if it qualifies as dormant or meets at least two SSM threshold criteria. Public companies, subsidiaries of public companies, foreign companies and certain exempt private companies are excluded.
At least two of three criteria must be met: annual revenue, total assets and full-time employees. For financial periods commencing from 1 January to 31 December 2026, the Phase 2 limits are RM2,000,000 revenue, RM2,000,000 assets and 20 employees. The current and two immediately preceding financial years are assessed using their respective phase limits.
It must have had no accounting transactions since incorporation, or no accounting transactions in the current financial year and the immediate preceding financial year.
No. Zero revenue alone is not a separate category under Practice Directive 10/2024. Unless the company is dormant, it must meet at least two threshold criteria for the applicable phases.
There is no separate application. An eligible company elects the exemption and lodges unaudited financial statements with the required certificate and other required reports.
Abigail Yu
Director
Abigail Yu oversees executive leadership at 3E Accounting Group, leading operations, IT solutions, public relations, and digital marketing to drive business success. She holds an honors degree in Communication and New Media from the National University of Singapore and is highly skilled in crisis management, financial communication, and corporate communications.
