# Audit Exemption for Small Companies in Malaysia

> Whether your private company qualifies for audit exemption under SSM Practice Directive 10/2024 — the two-of-three test, the phased thresholds, and where to go for the detail on each limb.

- Category: audit
- Language: en
- Status: published
- Updated: 2026-07-20
- Canonical: https://negaraku.md/en/audit/audit-exemption

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Not every Sdn Bhd needs an annual audit. The test is more generous than most people
assume in one respect and stricter in another — and both halves are widely
misreported.

The generous half: you only need **two of three** criteria. The strict half: the
thresholds are being **phased in over three years**, so the figures most articles
quote do not apply yet.

## The qualifying test

Under **Practice Directive 10/2024**, a private company qualifies if it satisfies
**at least two** of the following, for the current financial year *and* the
immediate past two:

1. Annual revenue does not exceed the threshold
2. Total assets do not exceed the threshold
3. Number of employees does not exceed the threshold

Because only two must be met, a company with RM4 million in revenue but modest
assets and a small headcount can still be exempt.

| | FY2025 | FY2026 | FY2027 onward |
| --- | --- | --- | --- |
| Revenue and assets | RM1,000,000 | RM2,000,000 | RM3,000,000 |
| Employees | 10 | 20 | 30 |

The preceding two years are tested against **that same phase**, not against the
older, lower figures.

Separately, a company that has been **dormant** since incorporation, or dormant
across the current and immediate past financial year, is exempt regardless of the
thresholds.

This directive revoked Practice Directive 3/2017 with immediate effect. Guidance
describing a separate *zero-revenue company* category is out of date.

## Where the detail lives

| Question | Article |
| --- | --- |
| Which figures apply to my year, and how is "employees" counted? | [Audit exemption thresholds](/en/audit/audit-exemption-thresholds) |
| Am I in a category that can never claim it? | [Who cannot claim audit exemption](/en/audit/who-cannot-claim-audit-exemption) |
| Does my company count as dormant? | [Dormant companies and audit exemption](/en/audit/dormant-company-audit-exemption) |
| What do I still owe if I take the exemption? | [Life after audit exemption](/en/audit/after-audit-exemption) |

## Two things to check before relying on it

**An audit can still be demanded.** Even a qualifying company must audit its
accounts if it receives written notice, no later than one month before the end of
the financial year, from members holding 5% of issued shares, from 5% of the
members eligible to vote, or from the Registrar.

**Exemption removes the audit, not the reporting.** Unaudited financial statements
still go to SSM, with the directors' report, statement by directors, statutory
declaration and a signed exemption certificate.

## Common mistakes

- **Requiring all three criteria.** Only two are needed, which wrongly rules out
  companies that do qualify.
- **Quoting RM3 million too early.** That is the FY2027 figure. A company with
  RM2.5 million of revenue in FY2026 does not meet the revenue limb.
- **Counting director-shareholders as employees**, inflating headcount past the
  threshold unnecessarily.
- **Relying on PD 3/2017 categories**, revoked in December 2024.

## What's next

If you qualify, the next question is what you actually lodge — the filing
obligation survives the exemption, and the certificate has prescribed contents.

## Sources

- Practice Directive No. 10/2024 — Qualifying Criteria for Audit Exemption for Certain Private Companies in Malaysia — https://www.ssm.com.my/Pages/Legal_Framework/Document/PD10-2024-Qualifying-Criteria-for-Audit-Exemption-for-Certain-Categories-of-Private-Companies.pdf (SSM)
- Frequently Asked Questions — Audit Exemption — https://www.ssm.com.my/Pages/Legal_Framework/Document/FAQ-AUDIT-EXEMPTION.pdf (SSM)
- Companies Act 2016 — https://www.ssm.com.my/Pages/Legal_Framework/Companies-Act-2016.aspx (SSM)

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Source of truth: https://github.com/negaraku-md/NegaraKu.md
License: CC BY-SA 4.0